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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1997
REGISTRATION NO. 333-21793
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No.2 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUSTS
(ISSUER WITH RESPECT TO THE SECURITIES)
EAGLEMARK, INC.
(SPONSOR OF THE TRUSTS DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEVADA 88-0292891
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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4150 TECHNOLOGY WAY
CARSON CITY, NEVADA 89706
(702) 885-1200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
STEVEN F. DELI
CHIEF EXECUTIVE OFFICER
EAGLEMARK, INC.
4150 TECHNOLOGY WAY
CARSON CITY, NEVADA 89706
(702) 885-1200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
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M. DAVID GALAINENA, ESQ. JACK M. COSTELLO, ESQ.
Winston & Strawn Brown & Wood LLP
35 West Wacker Drive One World Trade Center
Chicago, Illinois 60601 New York, New York 10048
(312) 558-5600 (212) 839-5300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED (1) PRICE PER UNIT (2) PRICE REGISTRATION FEE
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Harley-Davidson Motorcycle Contract Backed $600,000,000 100% $600,000,000 $181,818.18(3)
Notes and Certificates
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(1) The amount of Securities being registered represents the maximum
aggregate principal amount of Securities currently expected to be offered
for sale.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) $304 paid upon the initial filing of the Registration Statement on
February 14, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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INTRODUCTORY NOTE
This Registration Statement contains a form of Prospectus relating to the
offering of series of Harley-Davidson Motorcycle Contract Backed Notes and/or
Harley-Davidson Motorcycle Contract Backed Certificates by various
Harley-Davidson Eaglemark Motorcycle Trusts created from time to time by
Eaglemark, Inc., as well as two forms of Prospectus Supplement relating to
the offering by a Harley-Davidson Eaglemark Motorcycle Trust of the particular
series of Harley-Davidson Motorcycle Contract Backed Certificates or of
Harley-Davidson Motorcycle Contract Backed Notes and/or Harley-Davidson
Motorcycle Contract Backed Certificates described therein. Each form of
Prospectus Supplement relates only to the securities described therein and is a
form that may be used, among others, by Eaglemark, Inc. to offer Harley-Davidson
Motorcycle Contract Backed Notes and/or Harley-Davidson Motorcycle Contract
Backed Certificates under this Registration Statement.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, dated , 1997
PROSPECTUS
Harley-Davidson Eaglemark Motorcycle Trusts
Harley-Davidson Motorcycle Contract Backed Notes
Harley-Davidson Motorcycle Contract Backed Certificates
EAGLEMARK, INC.
The Harley-Davidson Motorcycle Contract Backed Notes (the "Notes") and
the Harley-Davidson Motorcycle Contract Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described
herein may be sold from time to time in one or more series, in amounts, at
prices and on terms to be determined at the time of sale and to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement"). Each series
of Securities, which will include one or more classes of Certificates and may
also include one or more classes of Notes, will be issued by a trust or other
legal entity to be formed with respect to such series (each, a "Trust"). Each
Trust will be formed pursuant to either (i) a Trust Agreement to be entered
into between a special-purpose finance subsidiary organized and established
by Eaglemark, Inc. (the "Company") (each such special-purpose finance
subsidiary, a "Trust Depositor"), as depositor, and the Trustee specified in
the related Prospectus Supplement (the "Trustee") or (ii) a Pooling and
Servicing Agreement to be entered into among the Trustee, the Trust
Depositor, as seller, and the Company, as servicer (in such capacity, the
"Servicer"). If a series of Securities includes Notes, such Notes will be
issued and secured pursuant to an Indenture between the Trust and the
Indenture Trustee specified in the related Prospectus Supplement (the
"Indenture Trustee") and will represent indebtedness of the related Trust.
The Certificates of a series will represent fractional undivided interests in
the related Trust. Each Prospectus Supplement will specify which class or
classes of Notes, if any, and/or which class or classes of Certificates of
the related series are being offered thereby. The property of each Trust will
include a pool of fixed rate, simple interest motorcycle conditional sales
contracts (collectively such contracts, the "Contracts") relating to
motorcycles manufactured by Harley-Davidson, Inc. ("Harley-Davidson") or, in
certain limited instances and subject to certain limitations described herein
(i) motorcycles manufactured by an affiliate of Harley-Davidson, Buell
Motorcycle Company ("Buell") and (ii) motorcycles manufactured by certain
other manufacturers ("Other Manufacturers") as well as certain monies due or
received thereunder on and after the applicable Cutoff Date set forth in the
related Prospectus Supplement, security interests in the motorcycles financed
through the Contracts and certain other property as described herein (the
"Trust Property"). In addition, if so specified in the related Prospectus
Supplement, the property of the Trust will include monies on deposit in a
trust account (the "Pre-Funding Account") and/or monies on deposit in a trust
account (the "Collateral Reinvestment Account") to be established with the
Indenture Trustee, which will be used to purchase additional Contracts (the
"Subsequent Contracts") from the Trust Depositor from time to time during the
Funding Period or Revolving Period specified in such Prospectus Supplement.
Except as otherwise provided in the related Prospectus Supplement,
each class of Securities of any series will represent the right to receive a
specified amount of payments and/or distributions, expected to be derived
primarily from collections in respect of principal and interest on the
related Contracts, with such payments and/or distributions to be made at the
rates, on the dates and in the manner described herein and in such Prospectus
Supplement. If a series includes multiple classes of Securities, the rights
of one or more classes of Securities to receive payments or distributions may
be senior or subordinate to the rights of one or more of the other classes of
such series. Also, distributions on Certificates of a series may be
subordinated in priority to payments due on the Notes, if any, of such series
to the extent described herein and in the related Prospectus Supplement. A
series may include one or more classes of Notes and/or Certificates which
differ from the other classes of such series as to the timing and priority of
payment, interest rate or amount of distributions in respect of principal or
interest or both. A series may include one or more classes of Notes or
Certificates entitled to distributions in respect of principal with
disproportionate, nominal or no interest distributions, or to interest
distributions, with disproportionate, nominal or no distributions in respect
of principal. The rate of payment in respect of principal of any class of
Notes and the rate of distributions in respect of the Certificate Balance (as
defined herein) of the Certificates of any class will depend on the priority
of payment of such class and the rate and timing of payments (including
prepayments, defaults, liquidations and repurchases of Contracts) on the
related Contracts. A rate of payment lower or higher than that anticipated
may affect the weighted average life of each class of Securities in the
manner described herein and in the related Prospectus Supplement.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" ON PAGE 12 OF THIS PROSPECTUS AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, THE
NOTES OF A SERIES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES WILL REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND WILL
NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED
BY, EAGLEMARK FINANCIAL SERVICES, INC., EAGLEMARK, INC., THE TRUST DEPOSITOR OR
ANY OF THEIR RESPECTIVE AFFILIATES OR ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. This Prospectus may not be
used to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is [ ], 1997.
2
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REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, the Servicer will prepare and
forward to the Applicable Trustee (as defined herein), for distribution to the
related Securityholders, certain monthly and annual reports concerning such
Securities and the related Trust. In addition, within the prescribed period of
time for tax reporting purposes after the end of each calendar year during the
term of each Trust, the Applicable Trustee will mail to each person who at any
time during such calendar year has been a registered Securityholder with respect
to such Trust and received any payment thereon a statement containing certain
information for the purposes of such Securityholder's preparation of federal
income tax returns. See "Federal Income Tax Consequences" and "Certain
Information Regarding the Securities -- Reports to Securityholders" herein.
AVAILABLE INFORMATION
The Company, as originator of the Contracts in each Trust, has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities being offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information, reference is made to
the Registration Statement, which is available for inspection without charge at
the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such information can be obtained from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an underwriter or a request by such
investor's representative within the period during which there is an
obligation to deliver a Prospectus Supplement and Prospectus, the Company or
the underwriters with respect to the related Trust will promptly deliver, or
cause to be delivered, without charge, to such investor a paper copy of the
Prospectus Supplement and Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed on behalf of each Trust by the Company as the
originator of the Contracts in each Trust, pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the date of this Prospectus and prior to the termination of the
offering of the Securities offered by such Trusts shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
dates of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein (or in the accompanying Prospectus
Supplement) or in any subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
The Company, on behalf of each Trust, will provide without charge to each
person, including any beneficial owner, to whom a copy of this Prospectus is
delivered, on the written or oral request of such person, a copy of any or all
of the documents incorporated herein by reference, except the exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
the documents incorporated herein by reference). Requests for such copies should
be directed to Secretary, Eaglemark, Inc., 4150 Technology Way, Carson City,
Nevada 89706; telephone (702) 885-1200.
3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Securities of any series contained in
the related Prospectus Supplement to be prepared and delivered in connection
with the offering of such Securities. Certain capitalized terms used in this
summary are defined elsewhere in this Prospectus on the pages indicated in
the "Index of Terms" on page 64.
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Issuer............................................ With respect to each series of Securities, a Trust
will be formed pursuant to either a Trust
Agreement (as amended and supplemented from time
to time, a "Trust Agreement") between the Trust
Depositor and the Trustee for such Trust or a
Pooling and Servicing Agreement (a "Pooling and
Servicing Agreement") among the Trustee, the Trust
Depositor and Eaglemark, Inc., as Servicer
for such Trust. Each Trust that is structured as
an owner trust intended to be taxable as a
partnership for federal income tax purposes will
be referred to herein as an "Owner Trust". Each
Trust that is taxable as a grantor trust under
subpart E, Part I of subchapter J of the Code (as
hereinafter defined) will be referred to herein as
a "Grantor Trust". There are also references
to the possibility of a Trust being structured as
a financial asset securitization investment trust,
referred to herein as a "FASIT," as authorized by
recent tax legislation.
Seller............................................ Eaglemark, Inc. (referred to herein as
"Eaglemark", the "Seller" or the "Company"), a
Nevada corporation, a 100% owned subsidiary of
Eaglemark Financial Services, Inc. ("Eaglemark
Financial"). The Company's principal executive
offices are located at 4150 Technology Way, Carson
City, Nevada 89706, and its telephone number is
(702) 885-1200. See "Eaglemark Financial Services,
Inc.; Eaglemark, Inc.; and the Trust Depositors".
Trust Depositor................................... With respect to each series of Securities, a
special-purpose finance subsidiary of the Company
Servicer.......................................... Eaglemark, Inc. (in such capacity, the "Servicer")
Trustee........................................... With respect to a Grantor Trust, the Trustee
specified in the related Prospectus Supplement and
with respect to an Owner Trust, the Owner Trustee
specified in the related Prospectus Supplement.
Indenture Trustee................................. With respect to any series of Securities that is
issued by an Owner Trust and includes one or more
classes of Notes, the Indenture Trustee specified
in the related Prospectus Supplement (each such
Indenture Trustee, or other Trustee as described
immediately above, being sometimes referred to
herein, as appropriate, as the "Applicable
Trustee").
Securities Offered................................ Each series of Securities issued by an Owner Trust
will include one or more classes of Certificates
and may also include one or more classes of Notes.
Each series of Securities issued by a Grantor
Trust will include one or more classes of
Certificates, but will not include any Notes. Each
class of Notes will be issued pursuant to an
indenture (each, an "Indenture") between the
related Owner Trust and the Indenture Trustee
specified in the related Prospectus Supplement.
Each class of Certificates will be issued pursuant
to the related Trust Agreement or the related
Pooling and Servicing Agreement.
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The related Prospectus Supplement will specify which class or
classes of Notes and/or Certificates of the related series are
being offered thereby.
The Notes......................................... Unless otherwise specified in the related
Prospectus Supplement, Notes will be available for
purchase in denominations of $1,000 and integral
multiples thereof and will be available in
book-entry form only. Unless otherwise specified
in the related Prospectus Supplement, Noteholders
will be able to receive Definitive Notes (as
defined herein) only in the limited circumstances
described herein or in such Prospectus Supplement.
See "Certain Information Regarding the Securities
-- Definitive Securities".
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes will
have a stated principal amount and will accrue
interest thereon at a specified rate (with respect
to each class of Notes, the "Interest Rate"). Each
class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable
Interest Rate, or any combination of the
foregoing. The related Prospectus Supplement will
specify the Interest Rate for each class of Notes,
or the method for determining such Interest Rate.
With respect to a series that includes two or more
classes of Notes, each such class may differ from
the other class or classes of such series as to
the timing and priority of payments, seniority,
allocations of losses, Interest Rate or amount of
payments of principal or interest. Payments of
principal or interest in respect of any such class
or classes may or may not be made upon the
occurrence of specified events or on the basis of
collections from designated portions of the Pool of
Contracts.
In addition, a series may include one or more
classes of Notes ("Strip Notes") entitled to (i)
principal payments with disproportionate, nominal
or no interest payments or (ii) interest payments
with disproportionate, nominal or no principal
payments.
Redemption of the Notes........................... If the Seller exercises its option to repurchase
the Contracts of a Trust in the event the Pool Balance
has declined to less than 10% of the Initial Pool
Balance in the manner and on the respective terms and
conditions described under "Description of the Sale and
Servicing Agreements and Pooling and Servicing
Agreements -- Termination", one or more classes of
the outstanding Notes will be redeemed as set
forth in the related Prospectus Supplement. In addition,
if the related Prospectus Supplement provides that
the property of a Trust will include monies in a
Pre-Funding Account or Collateral Reinvestment
Account that will be used to purchase additional
Contracts (see "Risk Factors--Sales of Subsequent
Contracts and Effect on Pool Characteristics"
herein) in such related Prospectus Supplement (the
"Closing Date"), one or more classes of the
outstanding Notes will be subject to partial
redemption at or immediately following the end of
the Funding Period or Revolving Period (each as
defined herein and in such Prospectus Supplement),
as applicable, in an amount and in the manner
specified in such Prospectus Supplement. In the
event of such partial redemption, the Noteholders
may be entitled to receive a prepayment premium
from the Trust, in the amount and to the extent
provided in the related Prospectus Supplement.
The Certificates............................. Unless otherwise specified in the related
Prospectus Supplement, Certificates
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will be available for purchase in a minimum denomination
of $1,000 and integral multiples thereof and will
be available in book-entry form only. Unless
otherwise specified in the related Prospectus
Supplement, Certificateholders will be able to
receive Definitive Certificates (as defined
herein) only in the limited circumstances
described herein or in such Prospectus Supplement.
See "Certain Information Regarding the Securities
-- Definitive Securities".
Unless otherwise specified in the related
Prospectus Supplement, each class of Certificates
will have a stated Certificate Balance specified
in such Prospectus Supplement (the "Certificate
Balance") and will accrue interest on such
Certificate Balance at a specified rate (with
respect to each class of Certificates, the "Pass-
Through Rate"). Each class of Certificates may
have a different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through Rate,
or any combination of the foregoing. The related
Prospectus Supplement will specify the
Pass-Through Rate for each class of Certificates
or the method for determining such Pass-Through
Rate.
With respect to a series that includes two or more
classes of Certificates, each such class may
differ from the other class or classes of such
series as to the timing and priority of
distributions, seniority, allocations of losses,
Pass-Through Rate or amount of distributions in
respect of principal or interest, or distributions
in respect of principal or interest in respect of
any such class or classes may or may not be made
upon the occurrence of specified events or on the
basis of collections from designated portions of
the pool of Contracts.
In addition, a series may include one or more
classes of Certificates ("Strip Certificates")
entitled to (i) distributions in respect of
principal with disproportionate, nominal or no
interest distributions or (ii) interest
distributions with disproportionate, nominal or no
distributions in respect of principal.
If a series of Securities includes classes of
Notes, distributions on the Certificates of such
series may be subordinated in priority of payment
to payments on such Notes to the extent specified
in the related Prospectus Supplement.
Prepayment of the Certificates.................... If the Seller exercises its option
to repurchase the Contracts of a Trust
in the event the Pool Balance has declined to less
than 10% of the Initial Pool Balance in the manner
and on the respective terms and conditions
described under "Description of the Sale and
Servicing Agreements and Pooling and Servicing
Agreements -- Termination", Certificateholders
will receive as a prepayment in respect of the
Certificates as specified in the related
Prospectus Supplement. In addition, if the related
Prospectus Supplement provides that the property
of a Trust will include monies in a Pre-Funding
Account or Collateral Reinvestment Account that
will be used to purchase additional Contracts
after the Closing Date (see Risk Factors--Sales of
Subsequent Contracts and Effect on Pool Characteristics"
herein), one or more classes of the outstanding
Certificates may receive a partial prepayment
of principal at or immediately following the end
of the Funding Period or Revolving Period, as applicable,
in an amount and in the manner specified in such
Prospectus Supplement. In the event of such partial
prepayment, the Certificateholders may be entitled
to receive a prepayment premium from the Trust, in
the amount and to the extent provided in the
related Prospectus Supplement.
Cross-Collateralization........................... As described in the related Trust Agreement
or Pooling and Servicing
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Agreement, as applicable, and the related
Prospectus Supplement, the source of payment for
Securities of each series will be the related
Trust Property only.
However, as may be described in the related
Prospectus Supplement, a series or class of
Securities may include the right to receive monies
from a common pool of credit enhancement which may
be available for more than one series of
Securities, such as a master reserve fund, master
insurance policy or a master collateral pool
consisting of similar Contracts. Notwithstanding
the foregoing, and as described in the related
Prospectus Supplement, no payment received on any
Contract held by any Trust may be applied to the
payment of Securities issued by any other Trust
(except to the limited extent that certain
collections in excess of the amounts needed to pay
the related Securities may be deposited in a
common master reserve fund or an
overcollateralization account that provides credit
enhancement for more than one series of Securities
issued pursuant to the related Trust Agreement or
Pooling and Servicing Agreement, as applicable).
The Trust Property................................ The property of each Trust will include a pool of
fixed-rate, simple interest motorcycle conditional
sales contracts (the "Contracts") relating to new
or used Harley-Davidson motorcycles or, in certain
limited instances and subject to certain other
limitations described herein, (i) motorcycles
manufactured by an affiliate of Harley-Davidson,
Buell Motorcycle Company ("Buell") and (ii)
motorcycles manufactured by certain other
manufacturers ("Other Manufacturers") (see "Other
Manufacturers" herein) as well as certain monies due
or received thereunder on and after the applicable
Cutoff Date set forth in the related Prospectus
Supplement, security interests in the
Motorcycles financed thereby (collectively,
the "Motorcycles"), all of the Trust
Depositor's right, title and interest in and to
the Transfer and Sale Agreement (as defined
herein) pursuant to which the Trust Depositor will
purchase Contracts from the Seller, any proceeds
from claims under certain insurance policies
related to the Motorcycles, and all other proceeds
of any of the foregoing. The property of each
Trust will also include amounts on deposit in
certain trust accounts, including the related
Collection Account, any Pre-Funding Account, any
Collateral Reinvestment Account, any Reserve Fund
(as defined herein) and any other account
identified in the applicable Prospectus Supplement
and such other property as is specified in such
Prospectus Supplement, including notes or other
securities evidencing or backed by Contracts. On
the Closing Date specified in the related
Prospectus Supplement with respect to a Trust, the
Trust Depositor will, if so specified in such
Prospectus Supplement, sell or transfer Contracts
(the "Initial Contracts") having an aggregate
principal balance specified in such Prospectus
Supplement as of the date specified therein (the
"Initial Cutoff Date") to such Trust pursuant to
either, in the case of Owner Trusts, a Sale
and Servicing Agreement among the Trust Depositor,
the Servicer, the Indenture Trustee and the Owner
Trust (a "Sale and Servicing Agreement") or, in
the case of Grantor Trusts, the related
Pooling and Servicing Agreement among the Trust
Depositor, the Servicer and the Trustee.
To the extent provided in the related Prospectus
Supplement, from time to time (as frequently as
daily) during the period (the "Funding Period")
specified in such Prospectus Supplement, the Trust
Depositor will be obligated (subject only to the
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7
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availability thereof) to sell, and the related
Trust will be obligated to purchase (subject to
the satisfaction of certain conditions described
in the applicable Sale and Servicing Agreement or
Pooling and Servicing Agreement), additional
Contracts (the "Subsequent Contracts") having an
aggregate principal balance approximately equal to
the amount on deposit (the "Pre-Funded Amount") in
an account (the "Pre-Funding Account") on the
related Closing Date. In no event will the Pre-
Funded Amount exceed 40% of the initial aggregate
principal amount of the Notes and/or Certificates
of the related series of Securities.
In addition, if so provided in the related
Prospectus Supplement, in lieu of a Funding
Period, during the period (the "Revolving Period")
from the Closing Date until the first to occur of
(i) such event or events as are described in such
Prospectus Supplement (each, an "Early
Amortization Event") or (ii) the last day of the
Due Period (as defined herein) preceding a
Distribution Date specified in such Prospectus
Supplement, an account will be maintained in the
name of the related Trustee or Indenture Trustee
(the "Collateral Reinvestment Account"). The
amount on deposit in the Collateral Reinvestment
Account on the Closing Date may, if so specified
in the related Prospectus Supplement, include an
amount to be deposited out of the net proceeds of
the sale of the related Securities. During the
Revolving Period, principal will not be
distributed on the Securities of the related
series. Instead, principal collections, together
with (if and to the extent described in the
related Prospectus Supplement) interest
collections on the Contracts that are in excess of
amounts required to be distributed therefrom, will
be deposited from time to time in the Collateral
Reinvestment Account and will be used to purchase
Subsequent Contracts.
As used in this Prospectus, the term "Contracts"
will include the Initial Contracts transferred to
a Trust on the Closing Date as well as any
Subsequent Contracts transferred to such Trust
during the related Funding Period or Revolving
Period, if any.
Amounts on deposit in any Pre-Funding Account
during the related Funding Period or in any
Collateral Reinvestment Account during the related
Revolving Period will be invested by the
Applicable Trustee (as directed by the Servicer)
in Eligible Investments (as defined herein), and
any resultant investment income, less any related
investment expenses ("Investment Income"), will be
added, on the Distribution Date (as defined
herein) immediately following the date on which
such Investment Income is paid to the Trust, to
interest collections on the Contracts for the
related Due Period (as defined herein),
or will otherwise be deposited or applied as
specified in the related Prospectus Supplement and
will be thereafter distributed in the manner
specified in the related Prospectus Supplement.
Any funds remaining in a Pre-Funding Account at
the end of the related Funding Period or in a
Collateral Reinvestment Account at the end of the
related Revolving Period will be distributed as a
prepayment or early distribution of principal to
holders of one or more classes of the Notes and/or
Certificates of the related series of Securities,
in the amounts and in accordance with the payment
priorities specified in the related Prospectus
Supplement. No Funding Period will end more than
ninety (90) days after the related Closing Date.
See "Risk Factors -- Pre-Funding Accounts", "--
Sales of Subsequent Contracts" and "Description of
the Sale and Servicing Agreements and Pooling and
Servicing Agreements -- Accounts".
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The Seller will acquire the Contracts from a
network of Harley-Davidson dealers located
throughout the United States (the "Dealers"). The
Contracts for any given pool of Contracts
comprising a Trust will be sold by the Seller to a
Trust Depositor pursuant to a related Transfer and
Sale Agreement (the "Transfer and Sale
Agreement"), which Trust Depositor will in turn
convey the Contracts to the Trust pursuant to the
related Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable. Such
Contracts will be selected from the contracts
owned by the Seller based on the criteria
specified in the related Transfer and Sale
Agreement, Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, and
described herein and in the related Prospectus
Supplement.
Credit and Cash Flow Enhancement.................. To the extent specified in the related Prospectus
Supplement, credit enhancement with respect to a
Trust or any class or classes of Securities may
include any one or more of the following:
subordination of one or more other classes of
Securities, Reserve Funds (as defined
herein), spread accounts, overcollateralization,
insurance policies, letters of credit, credit or
liquidity facilities, cash collateral accounts,
surety bonds, guaranteed investment contracts,
swaps or other interest rate protection
agreements, repurchase obligations, yield
supplement agreements, other agreements with
respect to third party payments or other support,
cash deposits or other arrangements. See
"Description of the Sale and Servicing
Agreements-- Credit and Cash Flow Enhancement"
herein. To the extent specified in the related
Prospectus Supplement, any particular form of
credit enhancement may be subject to certain
limitations and exclusions from coverage
thereunder.
Reserve Fund...................................... If and to the extent specified in the related
Prospectus Supplement, a Reserve Fund will be
created for a Trust with an initial deposit by the
Trust Depositor of cash or certain investments or
other property (including Contracts) having a
value equal to the amount specified in such
Prospectus Supplement. To the extent specified in
the related Prospectus Supplement, funds in the
Reserve Fund will thereafter be supplemented by
the deposit of amounts remaining on any
Distribution Date after making all other
distributions required on such date and any
amounts deposited from time to time in connection
with a purchase of Subsequent Contracts. Amounts
in the Reserve Fund, if any, will be available to
cover shortfalls in amounts due to the holders of
those classes of Securities specified in the
related Prospectus Supplement in the manner and
under the circumstances specified therein. The
related Prospectus Supplement will also specify to
whom and the manner and circumstances under which
amounts on deposit in the Reserve Fund (after
giving effect to all other required distributions
to be made by the applicable Trust) in excess of
the amounts required to be held therein as of
the date of determination (as set forth in such
Prospectus Supplement) will be distributed.
Sale and Servicing Agreements and Pooling and
Servicing Agreements............................ With respect to each Trust, the Trust Depositor
will sell the related Contracts and such other
Trust Property as is specified in the related
Prospectus Supplement to such Trust pursuant to a
Sale and Servicing Agreement or a Pooling and
Servicing Agreement, as applicable. The rights and
benefits of an Owner Trust under any Sale and
Servicing Agreement will, if such Owner Trust
issues Notes, be assigned to the related Indenture
Trustee as collateral for such Notes
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pursuant to the related Indenture. The Servicer will agree
with each Trust to be responsible for servicing,
managing, maintaining custody of and making
collections on the Contracts. The Company will
undertake certain administrative duties under an
Administration Agreement (as defined herein) with
respect to each Owner Trust that is formed
pursuant to a Trust Agreement.
To the extent specified in the related
Prospectus Supplement, the Servicer will be
obligated to advance each month an amount equal to
accrued and unpaid interest on the Contracts which
was delinquent with respect to the related Due
Period (as defined herein) but only to
the extent that the Servicer believes that the
amount of such advance will be recoverable from
collections on the Contracts (an "Advance"). The
Servicer will be entitled to reimbursement of
Advances from subsequent payments on or with
respect to the Contracts or from other sources to
the extent described in the related Prospectus
Supplement. The Servicer will disclose the
aggregate amount of Advances and the amount of related
deliquencies on Contracts as part of the monthly
statement provided to Securityholders and
described in "Certain Information Regarding the
Securities--Reports to Securityholders" herein. The
making of Advances indicates that while interest
payable on a portion of the Contracts in the
overall pool of Contracts held by the Trust may be
delinquent, the Servicer believes that it will
ultimately be reimbursed for such Advances from
collections on the pool of Contracts as a whole.
Unless otherwise provided in the related
Prospectus Supplement, under the respective Sale
and Servicing Agreement or Pooling and Servicing
Agreement, the Trust Depositor has agreed, in the
event of a breach of certain representations and
warranties related to the Contracts made by the
Trust Depositor and contained therein, to
repurchase such Contract within a certain
number of days as specified in the related
Prospectus Supplement, unless such breach is
cured. Eaglemark, as Seller under the related
Transfer and Sale Agreement (rights in respect
of which will be assigned to a Trust) is obligated
to repurchase the Contracts from the Trust Depositor
contemporaneously with the Trust Depositor's purchase
of such Contracts from the Trust. See "Certain
Information Regarding the Securities--Conveyance of
Contracts" and "Description of the Transfer and Sale
Agreements."
Security Interests in the Motorcycles; Consumer
Protection Laws; Repurchase Obligations.... In connection with the sale of the Contracts,
security interests in the Motorcycles securing the
Contracts will be assigned by the Seller to a
Trust Depositor pursuant to a Transfer and Sale
Agreement, which Trust Depositor will, in turn,
assign such security interests to the Trust
pursuant to either a Sale and Servicing Agreement
or a Pooling and Servicing Agreement. In the case
of an Owner Trust, such security interests in turn
will be pledged and assigned to the related
Indenture Trustee as security for any Notes issued
by such Trust.
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The certificates of title to the Motorcycles, however,
will not be amended or reissued to reflect the sale of
the Contracts and assignment of security interests to
either the Trust Depositor or the Trust or the pledge
pursuant to any Indenture, due to the administrative
burden and expense inherent in physically revising notations
of security interests on certificates of title for the
numerous individual Contract obligors in each applicable
state where Contracts are originated (and paying associated
fees in such states). In the absence of such amendments,
either the related Trust, the Applicable Trustee or both
will not have a perfected security interest in the Motorcycles
securing the Contracts in some states. The Seller will be
obligated to repurchase any Contracts sold to the related
Trust Depositor (and subsequently sold by such Trust Depositor
to such Trust) as to which there did not exist on the Closing
Date a first priority perfected security interest in the
name of the Company in the related Motorcycle, if such
failure materially and adversely affects the interest of
the Trust Depositor or such Trust in such Contract and if
such failure is not cured in a timely manner.
To the extent their respective security interests
in a Motorcycle are perfected, the related Trust
and the Applicable Trustee will have a prior claim
over subsequent purchasers of such Motorcycle and
holders of subsequently perfected security
interests therein. However, as against liens for
repairs or storage of a Motorcycle or for taxes
unpaid by the related obligor with respect to the
Contract (the "Obligor"), or through fraud or
negligence, the related Trust or the Applicable
Trustee could lose its security interest or the
priority of its security interest in a Motorcycle.
The Seller will not have any obligation to
repurchase a Contract with respect to which the
related Trust or the Applicable Trustee loses its
security interest or the priority of its security
interest in the related Motorcycle after the
Closing Date due to any such lien for repairs,
storage or taxes or the negligence or fraud of a
third party.
Federal and state consumer protection laws impose
requirements upon creditors in connection with
extensions of credit and collections of retail
installment loans, and certain of these laws make
an assignee of such a loan liable to the obligor
thereon for any violation by the lender. Unless
otherwise specified in the related Prospectus
Supplement, the Trust Depositor will be obligated
to repurchase from the applicable Trust any
Contract that fails to comply with such
requirements and contemporaneously therewith the
Seller, pursuant to the related Transfer and
Sale Agreement, will be obligated to repurchase
such Contract from the Trust Depositor.
Tax Status........................................ The federal income tax consequences applicable to
a Trust and to the Notes and Certificates issued
by the Trust will depend upon whether the Trust is
an Owner Trust, Grantor Trust or, under 1996
legislation effective on September 1, 1997, a
FASIT (as each of those terms is described herein)
as specified in the Prospectus Supplement
applicable to such Trust. See 'Federal Income
Tax Consequences" herein for a fuller discussion of
the following summary of federal income tax treatment.
For a Trust which is an Owner Trust, Federal Tax
Counsel (as defined herein) will deliver its
opinion that, for federal income tax purposes, any
Notes issued by such Trust will be characterized
as debt, and the Trust will not be characterized
as an association (or a publicly traded
partnership) taxable as a corporation. Each holder
of a Note (a "Noteholder"), by the acceptance of a
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Note, will agree to treat the Notes as
indebtedness, and each holder of a Certificate (a
"Certificateholder") issued by such Trust, by the
acceptance of a Certificate, will agree to treat
the Trust as a partnership in which the
Certificateholders are partners for federal income
tax purposes.
For a Trust which is a Grantor Trust, Federal Tax
Counsel will deliver its opinion that the Trust
will be classified as a grantor trust for federal
income tax purposes and not as an association
taxable as a corporation. Each Certificateholder
will be treated as the owner of an undivided
interest in the assets of the Trust, including the
Contracts. Accordingly, each Certificateholder
must report on its federal income tax return its
share of income from the Contracts and, subject to
limitations on deductions by individuals, estates
and trusts, may deduct its share of the reasonable
fees paid by the Trust, as if such
Certificateholder held its share of the assets of
the Trust directly. Furthermore, the Certificates
may represent interests in "stripped bonds" and
"stripped coupons" within the meaning of Section
1286 of the Code (as defined herein).
For a Trust which properly elects to be a FASIT,
Federal Tax Counsel will deliver its opinion that
the Trust will be treated as a FASIT and the
Securities issued by the FASIT will be
characterized as debt for federal income tax
purposes.
ERISA Considerations.............................. Fiduciaries of employee benefit plans and certain
retirement arrangements that are subject to the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 4975 of the Code,
should carefully review with their legal advisors
whether the purchase or holding of the Securities
may give rise to a transaction that is prohibited
or is not otherwise permissible either under ERISA
or Section 4975 of the Code. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
Ratings........................................... It is a condition to the issuance of the
Securities to be offered hereunder that they be
rated in one of the four highest rating categories
by at least one nationally recognized statistical
rating organization (a "Rating Agency"). A rating
is not a recommendation to purchase, hold or sell
Securities inasmuch as such rating does not
comment as to market price or suitability for a
particular investor. Ratings of Securities will
address the likelihood of the payment of principal
and interest thereon pursuant to their terms. The
ratings of Securities will not address the
likelihood of an early return of invested
principal. There can be no assurance that a rating
will remain for a given period of time or that a
rating will not be lowered or withdrawn entirely
by a Rating Agency if in its judgment
circumstances in the future so warrant. For more
detailed information regarding the ratings
assigned to any class of a particular series of
Securities, see "Summary of Terms -- Ratings"
herein and "Risk Factors-- Ratings of the Securities"
in the related Prospectus Supplement.
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RISK FACTORS
In addition to the other information contained in this Prospectus and in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of any series of Securities, prospective investors should carefully
consider the following risk factors before investing in any class or classes of
Securities of any such series.
REINVESTMENT RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS AND COLLATERAL
REINVESTMENT ACCOUNTS. If so provided in the related Prospectus Supplement, on
the Closing Date the Pre-Funded Amount specified in such Prospectus Supplement
will be deposited into the Pre-Funding Account. In addition, if so
specified in the related Prospectus Supplement, on the Closing Date specified
amounts will be deposited into the Collateral Reinvestment Account. During the
Revolving Period, principal will not be distributed on the Securities of the
related series, and principal collections, together with (if and to the extent
described in the related Prospectus Supplement) interest collections on the
Contracts that are in excess of amounts required to be distributed therefrom,
will be deposited from time to time in the Collateral Reinvestment Account. The
Pre-Funded Amount and the amounts on deposit in the Collateral Reinvestment
Account will be used to purchase Subsequent Contracts from the Trust Depositor
(which, concurrently will acquire such Subsequent Contracts from the
Company) from time to time during the related Funding Period or Revolving
Period, as applicable. If the principal amount of the eligible Subsequent
Contracts acquired by the Company from Dealers during a Funding Period or
Revolving Period is less than the Pre-Funded Amount or the amount on deposit in
the Collateral Reinvestment Account, as the case may be, the Company may have
insufficient Subsequent Contracts to transfer to the Trust Depositor. To
the extent that the entire Pre-Funded Amount or the entire amount on deposit in
the Collateral Reinvestment Account has not been applied to the purchase of
Subsequent Contracts by the end of the related Funding Period or Revolving
Period, any amounts remaining in the Pre-Funding Account or the
Collateral Reinvestment Account will be distributed as a prepayment of
principal to Noteholders, if applicable, and Certificateholders (collectively,
the "Securityholders") on the Distribution Date at or immediately following the
end of such Funding Period or Revolving Period, in the amounts and pursuant to
the priorities set forth in the related Prospectus Supplement (the "Mandatory
Special Redemption"). To the extent a Securityholder receives such a prepayment
of principal, there may not then exist a comparably favorable reinvestment
opportunity for such Securityholder. The Securityholders will bear all
reinvestment risk resulting from such prepayments. See also "-- Prepayments
on Contracts Affect Yield on Securities" below.
SALES OF SUBSEQUENT CONTRACTS AND EFFECT ON POOL CHARACTERISTICS. Any
conveyance of Subsequent Contracts to a Trust is subject to the satisfaction, on
or before the related transfer date (each, a "Subsequent Transfer Date"), of the
following conditions precedent, among others: (i) each such Subsequent Contract
must satisfy the eligibility criteria specified in the related Transfer and Sale
Agreement, Pooling and Servicing Agreement or Sale and Servicing Agreement, as
applicable; (ii) the Company and Trust Depositor shall not have selected such
Subsequent Contracts in a manner that is adverse to the interests of holders of
the related Securities; (iii) as of the respective Cutoff Dates (as such term is
defined in the related Prospectus Supplement) for such Subsequent Contracts, all
of the Contracts in the Trust, including the Subsequent Contracts to be conveyed
to the Trust as of such date, must satisfy the parameters described under "The
Contracts" herein and "The Contracts" in such Prospectus Supplement; and (iv)
the Trust Depositor must execute and deliver to such Trust a written assignment
conveying such Subsequent Contracts to such Trust. Except as described
herein and in the related Prospectus Supplement, there will be no other
required characteristics of Subsequent Contracts. It is not anticipated,
however, that the characteristics of the pool of Contracts as a whole will
vary significantly following the addition of Subsequent Contracts.
RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES. Each
Contract is secured by a security interest in a Motorcycle. As part of
the sale and assignment of Contracts to a Trust, security interests in the
related Contracts will be assigned by the Seller to the Trust Depositor
and by the Trust Depositor to such Trust. In most states, such an assignment
is an effective conveyance of a security interest without amendment of any
such security interest noted on a Motorcycle's certificate of title, and the
assignee succeeds thereby to the assignor's rights as secured party.
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However, in order to perfect such security interest, certain states
require the notation of a secured party's security interest on the vehicle's
certificate of title as filed with the applicable state motor vehicle
registrar or similar state authority. Due to administrative burden and
expense, the certificates of title to the Motorcycles will not be amended to
reflect the conveyance and assignment of Eaglemark's interest therein to the
Trust Depositor, the conveyance and assignment of the Trust Depositor's
interest therein to the Trust and the pledge of the Trust's interest therein
to the Indenture Trustee, as applicable. In the absence of such an amendment,
the Applicable Trustee, in certain cases, will not have a perfected security
interest in the Motorcycles. By not specifying the related Trust as a secured
party on the certificate of title, the security interest of the Trust, the
Indenture Trustee or both could be defeated through fraud or negligence of
the Seller or as a result of the imposition of a lien for repairs or storage
of a Motorcycle or for taxes unpaid by the Obligor under the related
Contract.
Pursuant to the Transfer and Sale Agreement, Eaglemark
will make certain representations and warranties relating to the validity,
subsistence, perfection and priority of the security interest in each
Motorcycle securing a Contract. A breach of any such representation and
warranty that materially and adversely affects the Trust's interest in any
Contract would create an obligation of the Trust Depositor in the Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, to
repurchase such Contract from the Trust and a simultaneous obligation of
Eaglemark to repurchase such Contract from the Trust Depositor (which right
of the Trust Depositor against Eaglemark is assigned to the Trust) unless
such breach is cured. In the event that the Trust must rely on repossession
and resale of Motorcycles securing Contracts that are in default to recover
principal and interest due thereon, certain other factors may limit the
ability of the Trust to realize upon the Motorcycle or may limit the amount
realized to less than the amount due. See "Certain Legal Aspects of the
Contracts" below.
To the extent that the Trust's and the Applicable Trustee's security
interest in a Motorcycle is perfected, the Trust and the Applicable Trustee will
have a prior claim under applicable state laws over subsequent purchasers of
such Motorcycle and holders of subsequently perfected security interests
therein. However, as against liens for repairs or storage of a Motorcycle or
taxes unpaid by the Obligor on the Contract secured thereby, the Trust and the
Applicable Trustee could lose their respective security interests or the
priority of such security interests in a Motorcycle. In addition, even if the
Seller, the Trust or the Applicable Trustee were to be identified as the secured
party on the certificate of title of a Motorcycle, such secured party's security
interest could be defeated by the fraud or forgery of the vehicle owner or by
administrative errors by applicable state or local agencies responsible for
titling vehicles. The Company will not have any obligation to repurchase a
Contract with respect to which the Trust or the Applicable Trustee loses its
security interest in the related Motorcycle after the Closing Date due to any
such lien for repairs, storage or taxes or due to the negligence or fraud of a
third party.
ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE ON
ITS SECURITY INTEREST IN THE MOTORCYCLES -- BANKRUPTCY LAWS. Under the
United States Bankruptcy Code, a court in a bankruptcy case with respect to
an Obligor on a Contract may prevent the Applicable Trustee from repossessing
a Motorcycle and may reduce the amount of secured indebtedness or change the
amount or timing of monthly payments or the interest rate applicable to a
Contract.
ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE ON
ITS SECURITY INTEREST IN THE MOTORCYCLES -- CONSUMER PROTECTION LAWS. Numerous
federal and state consumer protection laws impose requirements on lenders
and/ or servicers with respect to conditional financing arrangements such as
the Contracts, including requirements regarding the adequate disclosure of
loan terms (including finance charges and deemed finance charges) and
limitations on loan terms (including the permitted finance charge or deemed
finance charge), collection practices and creditor remedies. Failure by
Dealers or Eaglemark to comply with such requirements could have the effect
of subjecting an assignee of the Contracts to the related claims and defenses
of the Obligors on such Contracts. This risk would apply to a Trust as
assignee, and with respect to an Owner Trust, the Indenture Trustee
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as pledgee, of the Contracts. See also "Certain Legal Aspects of the
Contracts--Consumer Protection Laws" below.
The Seller will warrant under the related Transfer and Sale Agreement that
each Contract complies with all requirements of law in all material respects.
Accordingly, if an Obligor has a claim against the related Trust for violation
of any law and such claim materially and adversely affects such Trust's interest
in a Contract, such violation would constitute a breach of the warranties of the
Seller under the related Transfer and Sale Agreement and would create an
obligation of the Seller to repurchase the Contract from the Trust, through the
Trust Depositor (with the Trust as assignee of the Trust Depositor's rights
against the Seller in this regard), unless the breach were cured. See
"Description of the Sale and Servicing Agreements and Pooling and Servicing
Agreements -- Sale and Assignment of Contracts".
COMPANY BANKRUPTCY CONSIDERATIONS. Winston & Strawn, counsel to the Company
and the Trust Depositor, will render an opinion to the Applicable Trustee that
in the event the Company became a debtor under the United States Bankruptcy
Code, the transfer of the Contracts from the Company to the Trust Depositor in
accordance with the Transfer and Sale Agreement (and any related purchase
agreement in connection with transfers of Subsequent Contracts; hereinafter, a
"Subsequent Purchase Agreement") would be treated as a sale and not as a
pledge to secure borrowings and that the Trust Depositor would not be
consolidated with the Company as a single entity. If, however, the transfer of
the Contracts from the Company to the Trust Depositor were treated as a pledge
to secure borrowings by the Company or if the Trust Depositor were ordered
consolidated with the Company as a single entity or were to become bankrupt for
any reason the distribution of proceeds of the Contracts to the Trust might be
subject to the automatic stay provisions of the United States Bankruptcy Code,
which would delay the distribution of such proceeds for an uncertain period of
time. In addition, a bankruptcy trustee would have the power to sell the
Contracts if the proceeds of such sale could satisfy the amount of the debt
deemed owed by the Company, or the bankruptcy trustee could substitute other
collateral in lieu of the Contracts to secure such debt, or such debt could be
subject to adjustment by the bankruptcy court if the Company were to file for
reorganization under Chapter 11 of the United States Bankruptcy Code. A case
decided by the United States Court of Appeals for the Tenth Circuit contains
language to the effect that accounts sold by a debtor under Article 9 of the
Uniform Commercial Code ("UCC") would remain property of the debtor's
bankruptcy estate. Although the Contracts constitute chattel paper under the
UCC rather than accounts, sales of chattel paper are similarly governed by
Article 9 of the UCC. If, following a bankruptcy of the Company, a court were to
follow the reasoning of the Tenth Circuit and apply such reasoning to chattel
paper, then similar reductions or delays in payments of collections on or in
respect of the Contracts could occur. Additionally, because the Company has
purchased Contracts from Dealers located in the Tenth Circuit which could become
debtors in a bankruptcy proceeding, the rationale of such case could be
applicable to such Dealers' sales of Contracts to the Company and the
corresponding negative implications for timing of receipt of payments with
respect to such Contracts may occur.
RISKS ASSOCIATED WITH NON-RECOURSE NATURE OF SECURITIES -- NO RECOURSE TO
THE COMPANY, TRUST DEPOSITORS OR THEIR AFFILIATES. None of the Company, any
Trust Depositor or any of their affiliates is generally obligated to make any
payments in respect of any Notes, the Certificates or the Contracts of a
given Trust.
However, in connection with the sale of Contracts by the Trust Depositor to
a given Trust, the Trust Depositor will make representations and warranties with
respect to the characteristics of such Contracts and, in certain circumstances,
the Trust Depositor may be required to repurchase Contracts with respect to
which such representations and warranties have been breached. See "Description
of the Sale and Servicing Agreements and Pooling and Servicing Agreement -- Sale
and Assignment of Contracts". The Company, as Seller, will correspondingly be
obligated to the Trust Depositor under the Transfer and Sale Agreement (which
rights of the Trust Depositor against the Company will be assigned to the Trust)
to repurchase the Contracts from the Trust Depositor contemporaneously with the
Trust Depositor's purchase of the Contract from a Trust. See "Description of the
Transfer and Sale Agreement". Moreover, if the Company were to cease acting as
Servicer, delays in processing payments on the Contracts and information in
respect thereof could occur and
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result in delays in payments to the Securityholders. The related Prospectus
Supplement may set forth certain additional information regarding the Company
and any Trust Depositor.
RISKS ASSOCIATED WITH NON-RECOURSE NATURE OF SECURITIES -- TRUSTS HAVE NO
SIGNIFICANT ASSETS OR SOURCES OF FUNDS OTHER THAN THE CONTRACTS. None of the
Trusts will have, nor will any Trust be permitted or expected to have, any
significant assets or sources of funds other than the Contracts and, to the
extent provided in the related Prospectus Supplement, a Pre-Funding Account,
a Collateral Reinvestment Account, a Reserve Fund and any other credit
enhancement or Trust Property. The Notes of any series will represent
obligations solely of, and the Certificates of any series will represent
interests solely in, the related Trust, and neither the Notes nor the
Certificates of any series will be insured or guaranteed by the Trust
Depositor, the Servicer, the Applicable Trustee, or any other person or
entity (except as may be described in a Prospectus Supplement). Consequently,
holders of the Securities of any series must rely for repayment upon payments
on the related Contracts and, if and to the extent available, amounts on
deposit in the Pre-Funding Account (if any), the Collateral Reinvestment
Account (if any), the Reserve Fund (if any) and any other credit enhancement,
all as specified in the related Prospectus Supplement. Any such credit
enhancement will not cover all contingencies, and losses in excess of amounts
available pursuant to such credit enhancement will be borne directly by the
Securityholders.
SUBORDINATION OF CERTAIN CLASSES OF SECURITIES. To the extent specified
in the related Prospectus Supplement, distributions of interest and
principal on one or more classes of Notes, if any, or Certificates of a series
may be subordinated in priority of payment to interest and principal due on
certain of the Notes, if any, of such series or one or more classes of
Certificates of such series. As a result of such subordination, in the event
that losses with respect to the Contracts and associated reductions in
collections require application of available collections and credit enhancement
to a class of Securities with priority of payment over another class, there may
not be sufficient assets remaining to pay amounts due on the subordinated
Securities.
Prepayments on Contracts Affect Yield of Securities. By their terms,
the Contracts may be prepaid, in whole or in part, at any time and each
Contract contains a provision which permits the Trust Depositor to require
full prepayment in the event of a sale of the Motorcycle securing a Contract.
In addition, repurchases of the Contracts by the Seller through the Trust
Depositor could occur in the event of a breach of a representation and
warranty with respect to the Contracts and upon exercise of the Trust
Depositor's option to repurchase Contracts when the aggregate outstanding
principal balances of the Contracts owned by the Trust (the "Pool Balance")
has decreased to a certain level. Any prepayments and repurchases of
Contracts will reduce the average life of the Contracts and the interest
received by the Noteholders or Certificateholders over the life of the Notes
or Certificates (for this purpose the term "prepayment" includes liquidations
due to default, as well as receipt of proceeds from credit life, credit
disability and casualty insurance policies). In addition, with respect to an
Owner Trust the occurrence of a Mandatory Special Redemption at or before the
end of the Funding Period would have the effect of reducing the interest
received by Noteholders over the life of the Notes.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Distribution Date since such amount
will depend, in part, on the amount of principal collected on the related
pool of Contracts during the applicable Due Period. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Contracts, or
repurchases of Contracts, as described above, will be borne entirely by the
Securityholders of a given series. The related Prospectus Supplement may set
forth certain additional information with respect to the maturity and
prepayment considerations applicable to the particular pool of Contracts and
the related series of Securities. See "Weighted Average Life of the
Securities."
SOCIAL, ECONOMIC AND OTHER FACTORS AFFECTING THE PERFORMANCE OF THE
CONTRACTS OR GENERATION OF SUBSEQUENT CONTRACTS. Economic conditions in states
where Obligors reside may affect the delinquency, loan loss and repossession
experience of a Trust with respect to the related Contracts. The performance by
such Obligors, or the ability of Eaglemark to acquire from Dealers sufficient
Subsequent Contracts for purchase with the Pre-Funded Amount, may be affected
by a variety of social and economic factors
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including, but not limited to, interest rates, unemployment levels, the
rate of inflation, and consumer perception of economic conditions generally.
However, neither Eaglemark nor the Trust Depositor is able to determine and
has no basis to predict whether or to what extent economic or social factors
will affect the performance by any Obligors, or the availability of
Subsequent Contracts in cases where Subsequent Contracts are to be
transferred to a Trust as specified in the related Prospectus Supplement.
RISK ASSOCIATED WITH FAILURE OF OBLIGORS TO DESIGNATE PAYMENTS AS BEING
PAYMENTS ON THE CONTRACTS -- JOINT ACCOUNTS. In certain circumstances, the
monthly billing statements relating to the Contracts and provided to the
Obligors also reflect the Obligors' outstanding "Harley Card" monthly
balance. See "Eaglemark Financial Services, Inc.; Eaglemark, Inc.; and the
Trust Depositors." With respect to such a joint billing statement, the
Obligor sends one payment which if not appropriately designated by such
Obligor in the statement returned with their payment will be allocated first
to the minimum payment due on the Harley Card. To the extent a payment is
insufficient to cover payment amounts due under both the Contract and the
minimum amount due on the Harley Card, the Contract will suffer the
associated shortfall.
RISK OF COMMINGLING. With respect to each Trust, the Servicer will be
obligated to deposit all payments on the Contracts (from whatever source) and
all proceeds of such Contracts collected during each Due Period into the
Collection Account of such Trust within two business days of receipt thereof.
However, if so provided in the related Prospectus Supplement, in the event that
the Company satisfies certain requirements for monthly or less frequent
remittances and the Rating Agencies affirm their ratings of the related
Securities at the initial level, then for so long as the Company is the Servicer
and provided that (i) there exists no Servicer Default (as defined herein) and
(ii) each other condition to making such monthly or less frequent deposits as
may be specified by the Rating Agencies and described in such Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account of such Trust until on or before the
business day preceding each Distribution Date. The Servicer will also be
obligated to deposit the aggregate Purchase Amount (as defined herein) of
Contracts purchased by the Servicer into the applicable Collection Account on or
before the business day preceding each Distribution Date. Pending deposit into
such Collection Account, collections may be invested by the Servicer at its own
risk and for its own benefit and will not be segregated from funds of the
Servicer. If the Servicer were unable to remit such funds, the applicable
Securityholders might incur a loss. To the extent set forth in the related
Prospectus Supplement, the Servicer may, in order to satisfy the requirements
described above, obtain a letter of credit or other security for the benefit of
the related Trust to secure timely remittances of collections on the related
Contracts and payment of the aggregate Purchase Amount with respect to Contracts
purchased by the Servicer.
NOTEHOLDERS' ABILITY TO REMOVE SERVICER WITHOUT CERTIFICATEHOLDERS'
CONSENT. Unless otherwise provided in the related Prospectus
Supplement with respect to a series of Securities issued by an Owner Trust that
includes Notes, in the event a Servicer Default (as defined herein) occurs, the
Indenture Trustee or the Noteholders with respect to such series, as
described under "Description of the Sale and Servicing Agreements and Pooling
and Servicing Agreements -- Rights upon Servicer Default", may remove the
Servicer without the consent of the Owner Trustee or any of the
Certificateholders with respect to such series. The Owner Trustee or the
Certificateholders with respect to such series will not have the ability,
without the concurrence of the Noteholders of such series, to remove the
Servicer if a Servicer Default occurs.
NO ASSURANCES GIVEN AS TO CHANGES IN THE RATINGS OF THE SECURITIES. It
is a condition to the issuance of the Securities to be offered hereunder that
they be rated in one of the four highest rating categories by at least one
nationally recognized statistical rating organization (a "Rating Agency"). A
rating is not a recommendation to purchase, hold or sell Securities inasmuch
as such rating does not comment as to market price or suitability for a
particular investor. Ratings of Securities will address the likelihood of the
payment of principal and interest thereon pursuant to their terms. The
ratings of Securities will not address the likelihood of an early return of
invested principal. There can be no assurance that a rating will remain for a
given period of time or that a rating will not be lowered or withdrawn
entirely by a Rating Agency if in its judgment circumstances in the future so
warrant. For more detailed information regarding the ratings assigned to any
class of a particular series of Securities, see "Summary of Terms -- Ratings"
and "Risk Factors -- Ratings of the Securities" in the related Prospectus
Supplement.
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BOOK-ENTRY REGISTRATION -- SECURITYHOLDERS LIMITED TO EXERCISING THEIR
RIGHTS THROUGH DTC. Unless otherwise specified in the related Prospectus
Supplement, each class of Securities of a given series will be initially
represented by one or more certificates registered in the name of Cede & Co.
("Cede"), or any other nominee for The Depository Trust Company ("DTC") set
forth in such Prospectus Supplement (Cede, or such other nominee, "DTC's
Nominee"), and will not be registered in the names of the holders of the
Securities of such series or their nominees. Because of this, unless and
until Definitive Securities (as defined herein) for such series are issued,
Securityholders will not be recognized by the Applicable Trustee. Hence,
until Definitive Securities are issued, Securityholders will be able to
exercise their rights only indirectly through DTC and its participating
organizations. See "Certain Information Regarding the Securities --
Book-Entry Registration" and "-- Definitive Securities".
LIMITED LIQUIDITY. There is currently no secondary market for the
Securities. There can be no assurance that any such market will develop or, if
it does develop, that it will provide Securityholders with liquidity of
investment or will continue for the life of the Securities. The Securities will
not be listed on any securities exchange.
THE TRUSTS
With respect to each series of Securities, the Trust Depositor will
establish a separate Trust pursuant to the respective Trust Agreement or
Pooling and Servicing Agreement, as applicable, for the transactions
described herein and in the related Prospectus Supplement. The property of
each Trust will include a pool of retail installment sales contracts of new
and used Harley-Davidson motorcycles, or in certain limited instances
Motorcycles manufactured by Buell (limited to 2.5% of the principal balance
of the Contracts owned by a Trust) and Motorcycles manufactured by certain
Other Manufacturers (see "Other Manufacturers" herein) (limited to 10% of the
principal balance of the Contracts owned by a Trust) as well as all payments
due thereunder on and after the applicable Cutoff Date. Such Contracts will
be sold by the Company to the Trust Depositor but will continue to be
serviced by the Company as Servicer. On the applicable Closing Date, after
the issuance of the Certificates and any Notes of a given series, the Trust
Depositor will sell the Initial Contracts to the Trust to the extent
specified in the related Prospectus Supplement. If and to the extent so
provided in the related Prospectus Supplement, Subsequent Contracts will be
conveyed to the Trust as frequently as daily during the Funding Period. In
addition, if so provided in the related Prospectus Supplement, the property
of a Trust may also include monies deposited into the Collateral Reinvestment
Account on the Closing Date. With respect to an Owner Trust, during the
Revolving Period (if applicable), principal will not be distributed on the
Securities of the related series, and principal collections on the Contracts
of such Trust, together with (if and to the extent described in the related
Prospectus Supplement) interest collections on such Contracts that are in
excess of amounts required to be distributed therefrom, will be deposited
from time to time in the Collateral Reinvestment Account and will be used by
the Trust to purchase Subsequent Contracts during such Revolving Period. Any
Subsequent Contracts so conveyed will also be assets of the applicable Trust,
subject, in the case of any Owner Trust that issues Notes, to the prior
rights of the related Indenture Trustee and the Noteholders, if any, in such
Subsequent Contracts. The property of each Trust will also include (i) such
amounts as from time to time may be held in separate trust accounts
established and maintained pursuant to the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and the proceeds of such
accounts, as described herein and
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in the related Prospectus Supplement; (ii) security interests in the
Motorcycles and any other interest of the Trust Depositor in such
Motorcycles; (iii) the rights to proceeds from claims on certain physical
damage, credit life and disability insurance policies covering the
Motorcycles or the Obligors, as the case may be; (iv) the interest of the
Trust Depositor in any proceeds from recourse to Dealers (as defined herein)
or other originators in respect of Contracts as to which the Servicer has
determined that eventual repayment in full is unlikely; and (v) any and all
proceeds of the foregoing. To the extent specified in the related Prospectus
Supplement, a Pre-Funding Account, a Collateral Reinvestment Account, a
Reserve Fund or other form of credit enhancement or such other property,
may be a part of the property of any given Trust or may be held by the
Trustee or an Indenture Trustee for the benefit of holders of the related
Securities.
The Servicer will continue to service the Contracts held by each Trust
and will receive fees for such services. See "Description of the Sale and
Servicing Agreements and Pooling and Servicing Agreements -- Servicing
Compensation and Payment of Expenses" herein and in the related Prospectus
Supplement. To facilitate the servicing of the Contracts, the Trust Depositor
and the Applicable Trustee will authorize the Servicer to retain
physical possession of the Contracts held by each Trust and other documents
relating thereto as custodian for each such Trust. Due to the administrative
burden and expense, the certificates of title to the Motorcycles will not be
amended to reflect the sale and assignment of the security interest in the
Motorcycles to each Trust. In the absence of such an amendment, the Trust may
not have a perfected security interest in the Motorcycles in all states. See
"Risk Factors-- Risk of Unperfected Security Interests in Financed
Motorcycles"; "Certain Legal Aspects of the Contracts"; and "Description of
the Sale and Servicing Agreements and Pooling and Servicing Agreements --
Sale and Assignment of Contracts" herein.
If the protection provided to any Noteholders of a given series by the
subordination of the related Certificates and by the Reserve Fund, if any, or
other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Fund or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be, would
have to look principally to the Obligors on the related Contracts, the proceeds
from the repossession and sale of Motorcycles which secure defaulted Contracts
and the proceeds from any recourse against Dealers or other originators with
respect to such Contracts. In such event, certain factors, such as the
applicable Trust's not having perfected security interests in the Motorcycles in
all states, may affect the Servicer's ability to repossess and sell the
collateral securing the Contracts, and thus may reduce the proceeds to be
distributed to the holders of the Securities of such series. See "Description of
the Sale and Servicing Agreements and Pooling and Servicing Agreements --
Distributions", "-- Credit and Cash Flow Enhancement" and "Certain Legal Aspects
of the Contracts".
The principal offices of each Trust and the related Applicable Trustee
will be specified in the applicable Prospectus Supplement.
THE TRUSTEE AND THE INDENTURE TRUSTEE
The Trustee and the Indenture Trustee, as applicable, for each Trust will
be specified in the related Prospectus Supplement. The Applicable Trustee's
liability in connection with the issuance and sale of the related Securities
will be limited solely to the express obligations of such Applicable Trustee
set forth in the related Trust Agreement and the Sale and Servicing Agreement
or the related Pooling and Servicing Agreement, as applicable. The Applicable
Trustee may resign at any time, in which event the Servicer, or its successor
(or, in the case of an Owner Trust that issues Notes, the Administrator
thereof), will be obligated to appoint a successor trustee. The Administrator
of any Owner Trust that issues Notes and the Servicer in respect of any
Grantor Trust may also remove the Applicable Trustee if such Trustee ceases
to be eligible to continue as Trustee under the related Trust Agreement or
Pooling and Servicing Agreement, as applicable, or if the Applicable Trustee
becomes insolvent. In such circumstances, the Administrator or Servicer, as
applicable, will be obligated to appoint a successor Trustee. Any resignation
or removal of a Trustee or Indenture Trustee, as applicable, and appointment
of a successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
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HARLEY-DAVIDSON MOTORCYCLES
All of the Motorcycles securing Contracts were manufactured by
Harley-Davidson, except that not more than 2.5% of the Contracts (including all
Subsequent Contracts) may relate to, and be secured by, Motorcycles manufactured
by Buell, and not more than 10.0% of the Contracts (including all Subsequent
Contracts) may relate to, and be secured by, Motorcycles manufactured by Other
Manufacturers. See "Other Manufacturers." Buell produces "performance"
motorcycles using engines and certain other parts manufactured by
Harley-Davidson.
Harley-Davidson produces and sells premium superheavyweight motorcycles.
Within the superheavyweight class, Harley-Davidson sells touring motorcycles
(equipped for long-distance touring), as well as motorcycles which emphasize the
distinctive styling associated with certain classic Harley-Davidson motorcycles.
Harley-Davidson motorcycles are based on variations of five basic chassis
designs and are powered by one of three air cooled, twin cylinder engines of "V"
configuration which have displacements of 883cc, 1200cc, and 1340cc.
Harley-Davidson manufactures its own engines and frames and is the only major
manufacturer of motorcycles in the United States.
Buell produces "performance" motorcycles using Harley-Davidson 1200cc
engines that are further modified in the manufacturing process, as well as
certain other Harley parts. The "performance" aspect of the motorcycles refers
to overall handling characteristics of the motorcycle, including cornering,
acceleration and braking. Buell motorcycles and related products are currently
distributed exclusively through Harley-Davidson dealers. Buell's overall share
of the "performance" market is negligible.
OTHER MANUFACTURERS
Except as otherwise specified in the related Prospectus Supplement,
Contracts aggregating not more than 10.0% of the aggregate principal balances
of all Contracts in a Trust (including Subsequent Contracts) may relate to,
and be secured by, Motorcycles manufactured by Honda, Yamaha, Suzuki,
Kawasaki as well as certain other manufacturers. Such Motorcycles fall within
two (2) categories: "touring cycles" (with displacements typically over
750cc) which are generally intended for use in long distance travel, and
"street legal cycles", which include all other motorcycles which may be
licensed for street use under applicable state or local law and which are not
generally viewed as falling with the "touring cycle" category.
THE CONTRACTS
GENERAL
The Contracts (including Subsequent Contracts) in each Trust have been or
will be purchased by the Company from a network of Harley-Davidson Dealers
located throughout the United States. The Company's personnel contact Dealers
and explain the Company's available financing plans, terms, prevailing rates
and credit and financing policies. If the Dealer wishes to use the Company's
available customer financing, the Dealer must make an application to the
Company for approval.
Contracts (including Subsequent Contracts) that the Company purchases are
written on forms provided or approved by the Company and are purchased on an
individually approved basis in accordance with the Company's guidelines. The
Dealer submits the customer's credit application and purchase order to the
Company's office where an analysis of the creditworthiness of the proposed
buyer is made. The analysis includes a review of the proposed buyer's paying
habits, length and likelihood of continued employment and certain other
procedures. The Company's current underwriting guidelines for Contracts
generally require that the monthly payment on the Contract, together with the
Obligor's other fixed monthly obligations, not exceed 40% of the Obligor's
monthly gross
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income; provided, however, the Company may originate a Contract in excess of
40% of an Obligor's monthly gross income if the Obligor makes a larger down
payment or has an exceptionally good credit rating or other offsetting
factors exist. With respect to Contracts for new Motorcycles, and for used
Motorcycles of model year 1990 or later, the Company generally finances up to
90% of the Motorcycle's sales price. The Company generally finances up to 85%
of such amount for used Motorcycles of a model year earlier than 1990. The
Company will also finance certain Dealer installed accessories, sales tax and
title fees as well as premiums for the term of the contract on optional
credit life and accident and health insurance, premiums for extended warranty
insurance and premiums for required physical damage insurance on the
Motorcycle which financed amounts are part of the principal balance of the
respective Contract. If the application meets the Company's guidelines and
the credit is approved, the Company purchases the Contract when the customer
accepts delivery of the Motorcycle.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the experience of the Company pertaining to
delinquencies, repossessions and net losses with respect to new and used
Motorcycle Contracts will be set forth in each Prospectus Supplement. There can
be no assurance that the delinquency, repossession and net loss experience on
any particular pool of Contracts will be comparable to prior experience or to
such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes, if any, and the Certificates of
any series will generally be influenced by the rate at which the principal
balances of the related Contracts are paid, which payment may be in the form
of scheduled amortization or prepayments. (For this purpose, the term
"prepayments" includes prepayments in full, partial prepayments (including
those related to rebates of extended warranty contract costs and insurance
premiums), liquidations due to default, losses caused by the issuance of an
order by a court in any insolvency proceeding reducing the amount owed under
a Contract, as well as receipts of proceeds from physical damage, credit life
and disability insurance policies and from certain purchases or repurchases
of Contracts from the Trust.) All of the Contracts are prepayable at any
time without penalty to the Obligor. The rate of prepayment of Contracts is
influenced by a variety of economic, social and other factors. In addition,
under certain circumstances, the Company, through the Trust Depositor, will
be obligated to repurchase Contracts from a given Trust pursuant to the
related Transfer and Sale Agreement, Sale and Servicing Agreement or Pooling
and Servicing Agreement as a result of breaches of certain representations
and warranties. See "Description of the Sale and Servicing Agreements and
Pooling and Servicing Agreements -- Sale and Assignment of Contracts" and "--
Servicing Procedures". See also "Description of the Sale and Servicing
Agreements and Pooling and Servicing Agreements -- Termination" regarding the
Trust Depositor's option to repurchase the Contracts from a given
Trust (and the Seller's option to concurrently repurchase such Contracts
from the Trust Depositor) and "-- Insolvency Event" regarding the sale of the
Contracts owned by a Trust if an Insolvency Event with respect to the Trust
Depositor applicable to such Trust occurs.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Distribution Date since such amount will
depend, in part, on the amount of principal collected on the related pool of
Contracts during the applicable Due Period. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Contracts will be
borne entirely by the Noteholders, if any, and the Certificateholders of a given
series. The related Prospectus Supplement may set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to the particular pool of Contracts and the related series of
Securities.
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POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit decimal
which the Servicer will compute prior to each distribution with respect to such
class of Notes indicating the remaining outstanding principal balance of such
class of Notes, as of the applicable Distribution Date (after giving effect to
payments to be made on such Distribution Date), as a fraction of the initial
outstanding principal balance of such class of Notes. The "Certificate Pool
Factor" for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such class of
Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be. A Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (a) the original denomination of such Certificateholder's Certificate
and (b) the applicable Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement, the
Noteholders, if any, and the Certificateholders will receive reports on or about
each Distribution Date concerning, with respect to the Due Period
immediately preceding such Distribution Date, payments received on the
Contracts, the Pool Balance, each Certificate Pool Factor or Note Pool Factor,
as applicable, and various other items of information. In addition,
Securityholders of record during any calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities -- Reports to Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the Trust
will use the net proceeds received from the sale of the Securities (i) to
purchase the Initial Contracts and related assets from the Trust Depositor,
(ii) to make the deposit, if any, of the Pre-Funded Amount into the
Pre-Funding Account, if any, and (iii) to make the initial deposit, if any, to
the Collateral Reinvestment Account, if any. The Seller will use the net
proceeds from the Trust Depositor's purchase of the Initial Contracts, as
well as Subsequent Contracts, for the repayment of warehouse lines through
which it finances its Motorcycle conditional sales contracts and for other
corporate purposes.
EAGLEMARK FINANCIAL SERVICES, INC.; EAGLEMARK, INC.;
AND THE TRUST DEPOSITORS
Eaglemark Financial Services, Inc.
Eaglemark Financial was formed in June 1992 with a capital infusion of
$10,000,000 from Harley-Davidson and an additional $15,000,000 capital
contribution from a major institutional investor in January 1993. In November
1995, Harley-Davidson purchased the equity owned by the major institutional
investor and as a result Eaglemark Financial is a 97% owned subsidiary of
Harley-Davidson. The business of Eaglemark Financial, through its 100% ownership
of Eaglemark, has been to provide wholesale and retail financing, credit card
and insurance services to Dealers and customers of Harley-Davidson.
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Eaglemark, Inc.
Eaglemark was incorporated as a Nevada corporation in 1992 and is a
wholly-owned subsidiary of Eaglemark Financial. Eaglemark began operations in
January 1993 when it purchased the $85 million wholesale financing portfolio
of certain Harley-Davidson Dealers from ITT Commercial Finance; subsequently,
Eaglemark entered the retail consumer finance business. Eaglemark provides
financing to Harley-Davidson customers for new and used motorcycles and
Harley-Davidson branded products including accessories through its
private-label "Harley Card," as well as a range of motorcycle insurance
products through a wholly-owned subsidiary. Eaglemark also finances extended
service contracts on Motorcycles. Eaglemark's financing, credit card and
insurance programs are designed to work together as a package that appeals to
the needs of Harley-Davidson's customers. The intent of such a package is to
increase Dealer and customer loyalty to Eaglemark while improving revenue and
profits over time. Eaglemark's principal executive offices are located at
4150 Technology Way, Carson City, Nevada 89706 (telephone 702/885-1200).
During the third quarter of 1994, Eaglemark began providing retail consumer
financing for other product lines. Initially, Eaglemark provided financing for
marine boat dealers under the trade names "MasterCraft Credit," "WetJet Credit,"
"Skeeter Credit," "Boston Whaler Financial Services," and "Mariah Financial
Services." Eaglemark has since added new lines of consumer financing including
(i) recreational vehicle financing through RV dealers under the trade name of
"Holiday Rambler Credit"; (ii) Motorcycle financing through the Canadian
Harley-Davidson dealers transacted under the trade name "Deeley Credit"; and
(iii) single-engine aircraft financing provided directly through Mooney Aircraft
under the trade name "Mooney Financial Services" or through a broker (Sterling
Air) under the Eaglemark name. Eaglemark also provides other forms of consumer
financing through various Dealers on a case-by-case basis.
THE TRUST DEPOSITORS
With respect to each series of Securities, the Trust Depositor will be a
special-purpose finance subsidiary of the Company. All of the common stock of
the Trust Depositor will be owned by Eaglemark. All of the officers and
directors of each Trust Depositor will be employed by Eaglemark or Eaglemark
Financial, except that one director of each Trust Depositor shall at all times
be independent of Eaglemark, Eaglemark Financial and Harley-Davidson.
DESCRIPTION OF THE NOTES
GENERAL
Each Owner Trust may issue one or more classes of Notes pursuant to an
Indenture, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository"), except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, the Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof in book-entry form only. The Company has been informed by DTC that DTC's
nominee will be Cede, unless another nominee is specified in the related
Prospectus Supplement. Accordingly, such nominee is expected to be the holder of
record of the Notes of each class. Unless and until Definitive Notes (as defined
herein) are issued under the limited circumstances described herein or in the
related Prospectus Supplement, no Noteholder will be entitled to receive a
physical certificate representing a Note. All references herein and in the
related Prospectus Supplement to actions by Noteholders refer to actions taken
by DTC upon instructions from its participating organizations (the
"Participants"), and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to Noteholders
refer to distributions, notices, reports and statements to DTC or its nominee,
as the registered holder of the Notes, for distribution to Noteholders in
accordance with DTC's procedures with respect thereto. See "Certain Information
Regarding the Securities -- Book-Entry Registration" and "-- Definitive
Securities".
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PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal
and interest on each class of Notes of a given series will be described in
the related Prospectus Supplement. The right of holders of any class of Notes
to receive payments of principal and interest may be senior or subordinate to
the rights of holders of any other class or classes of Notes of such series,
as described in the related Prospectus Supplement. Unless otherwise provided
in the related Prospectus Supplement, payments of interest on the Notes of
such series will be made prior to payments of principal thereon. If so
provided in the related Prospectus Supplement, a series may include one or
more classes of Strip Notes entitled to (i) principal payments with
disproportionate, nominal or no interest payments or (ii) interest payments
with disproportionate, nominal or no principal payments. Each class of Notes
may have a different Interest Rate, which may be a fixed, variable or
adjustable Interest Rate (and which may be zero for certain classes of Strip
Notes), or any combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate for each class of Notes of a given
series or the method for determining such Interest Rate. See also "Certain
Information Regarding the Securities -- Fixed Rate Securities" and "--
Floating Rate Securities". One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the
related Prospectus Supplement, including, if a Pre-Funding Account or
Collateral Reinvestment Account has been established with respect to a
related series, from amounts remaining in the applicable account at the end
of the Funding Period or Revolving Period, as the case may be, or as a result
of the Seller through the Trust Depositor exercising its option to repurchase
the related pool of Contracts.
To the extent specified in any Prospectus Supplement, one or more classes of
Notes of a given series may have fixed principal payment schedules, as set forth
in such Prospectus Supplement; Noteholders of such Notes would be entitled to
receive as payments of principal on any given Distribution Date the applicable
amounts set forth on such schedule with respect to such Notes, in the manner and
to the extent set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments to
holders of Notes of all classes within a series in respect of interest will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "Distribution Date"), in which case each class of Noteholders will receive its
ratable share (based upon the aggregate amount of interest due to the holders of
such class of Notes) of the aggregate amount available to be distributed in
respect of interest on the Notes of such series. See "Description of the Sale
and Servicing Agreements and Pooling and Servicing Agreements -- Distributions"
and "-- Credit and Cash Flow Enhancement".
In the case of a series of Securities which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal of and interest on any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class. One or more classes of Notes of a series may be redeemable in whole
or in part under the circumstances specified in the related Prospectus
Supplement, including, if a Pre-Funding Account or Collateral Reinvestment
Account has been established with respect to the related series, from amounts
remaining in the applicable account at the end of the Funding Period or
Revolving Period, as the case may be, or as a result of the exercise by the
Seller through the Trust Depositor or such other party as may be specified in
the related Prospectus Supplement of its option to repurchase the related pool
of Contracts. See "Description of the Sale and Servicing Agreements and Pooling
and Servicing Agreements -- Termination".
CERTAIN PROVISIONS OF THE INDENTURE
Events of Default; Rights upon Event of Default. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will include the
following: (i) a default for five days or more in the payment of any interest on
any such Note; (ii) a default in the payment of the principal, or any
installment of the principal, of any such Note when the same
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becomes due and payable; (iii) a default in the observance or performance of
any covenant or agreement of the applicable Trust made in such Indenture and
the continuation of any such default for a period of 30 days after notice
thereof is given to such Trust by the applicable Indenture Trustee or to such
Trust and such Indenture Trustee by the holders of at least 25% in principal
amount of such Notes then outstanding; (iv) any representation or warranty
made by such Trust in such Indenture or in any certificate delivered pursuant
thereto or in connection therewith having been incorrect in a material
respect as of the time made, if such breach is not cured within 30 days after
notice thereof is given to such Trust by the applicable Indenture Trustee or
to such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding; or (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the applicable Trust.
However, the amount of principal required to be paid to Noteholders of such
series under the related Indenture will generally be limited to amounts
available to be deposited in the applicable Note Distribution Account.
Therefore, unless otherwise specified in the related Prospectus Supplement,
the failure to pay principal on a class of Notes generally will not result in
the occurrence of an Event of Default until the final scheduled Distribution
Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an Event
of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or holders of 66 2/3% of the
principal amount (or a lesser percentage as specified in the related Prospectus
Supplement, but in no case less than 51%) of such Notes then outstanding may
declare the principal of such Notes to be immediately due and payable. Unless
otherwise specified in the related Prospectus Supplement, such declaration may,
under certain circumstances, be rescinded by the holders of 66 2/3% (or a
lesser percentage as specified in the related Prospectus Supplement, but in no
case less than 51%) of the principal amount of such Notes then outstanding.
If the Notes of any series are declared due and payable following an
Event of Default with respect thereto, the related Indenture Trustee may
institute proceedings to collect amounts due or foreclose on Trust Property,
exercise remedies as a secured party, sell the related Contracts or elect to
have the applicable Trust maintain possession of such Contracts and continue
to apply collections on such Contracts as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus
Supplement, however, such Indenture Trustee is prohibited from selling such
Contracts following an Event of Default, other than a default in the payment
of any principal of, or a default for five days or more in the payment of any
interest on, any Note of such series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale or (iii) such Indenture Trustee
determines that the proceeds of the Contracts would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such obligations had not been declared due and payable, and
such Indenture Trustee obtains the consent of the holders of 66 2/3%
(or a lesser percentage as specified in the related Prospectus Supplement,
but in no case less than 51%) of the aggregate outstanding principal amount
of such Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such
Indenture at the request or direction of any of the holders of such Notes if
such Indenture Trustee reasonably believes it will not be adequately
indemnified against the costs, expenses and liabilities which might be
incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the related Indenture,
the holders of a majority in principal amount of the outstanding Notes of a
given series will have the right to direct the time, method and place of
conducting any proceeding or any remedy available to the applicable Indenture
Trustee, and the holders of a majority in principal amount of such Notes then
outstanding may, in certain cases, waive any default with respect thereto,
except a default in the payment of principal or interest or a default in
respect of a covenant or provision of such Indenture that cannot be modified
without the waiver or consent of all the holders of each such outstanding
Note.
Unless otherwise specified in the related Prospectus Supplement, no
holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
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previously has given to the applicable Indenture Trustee written notice of a
continuing Event of Default, (ii) the holders of not less than 25% in
principal amount of the outstanding Notes of such series have made written
request to such Indenture Trustee to institute such proceeding in its own
name as Indenture Trustee, (iii) such holder or holders have offered such
Indenture Trustee reasonable indemnity, (iv) such Indenture Trustee has for
60 days failed to institute such proceeding and (v) no direction inconsistent
with such written request has been given to such Indenture Trustee during
such 60-day period by the holders of a majority in principal amount of such
outstanding Notes.
In addition, unless otherwise specified in the related Prospectus
Supplement, each Indenture Trustee and the related Noteholders, by accepting
the related Notes, will covenant that they will not at any time institute
against the Trust Depositor or the applicable Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or
interest on the related Notes or for the agreements of such Trust contained
in the applicable Indenture.
Certain Covenants. Each Indenture will provide that the related Trust
may not consolidate with or merge into any other entity, unless, among such
other requirements as may be specified in the related Prospectus Supplement,
(i) the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States, any state or the District of
Columbia, (ii) such entity expressly assumes such Trust's obligation to make
due and punctual payments upon the Notes of the related series and to perform
or observe every agreement and covenant of such Trust under the Indenture,
(iii) no Event of Default shall have occurred and be continuing immediately
after such merger or consolidation, (iv) such Trust has been advised that the
rating of the Notes (and, if so provided in such Indenture, the Certificates)
of such series then in effect would not be reduced or withdrawn by the Rating
Agencies as a result of such merger or consolidation, (v) such Trust
has received an opinion of counsel to the effect that such consolidation or
merger would have no material adverse tax consequence to the Trust or to any
related Noteholder or Certificateholder and (vi) any action as is necessary
to maintain the lien and security interest of the Indenture shall have been
taken.
No Owner Trust will, among other things, (i) except as expressly
permitted by the applicable Indenture, the applicable Sale and Servicing
Agreement or Pooling and Servicing Agreement or certain related documents
with respect to such Trust (collectively, the ""Related Documents''), sell,
transfer, exchange or otherwise dispose of any of the assets of such Trust,
(ii) claim any credit on or make any deduction from the principal and
interest payable in respect of the Notes of the related series (other than
amounts properly withheld under the Code or applicable state law) or assert
any claim against any present or former holder of such Notes because of the
payment of taxes levied or assessed upon such Trust, (iii) permit the
validity or effectiveness of such Indenture to be impaired or permit any
person to be released from any covenants or obligations with respect to such
Notes under such Indenture except as may be expressly permitted thereby or
(iv) permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon or
burden the assets of such Trust or any part thereof, or any interest therein
or the proceeds thereof (other than tax liens, mechanics' liens and other
liens that arise by operation of law, in each case on a Motorcycle and
arising solely as a result of an action or omission of the related Obligor).
No Trust may engage in any activity other than as described herein or in
the Prospectus Supplement. No Trust will incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the related Notes
and the related Indenture, pursuant to any Advances made to it by the
Servicer or otherwise in accordance with the Related Documents.
Modification of Indenture. Each Owner Trust and the related Indenture
Trustee may, with the consent of the holders of 51% (or such higher
percentage as specified in the related Prospectus
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Supplement) of the outstanding Notes of the related series, execute a
supplemental indenture to add provisions to, change in any manner or
eliminate any provisions of, the related Indenture, or modify (except as
provided below) in any manner the rights of the related Noteholders.
However, unless otherwise specified in the related Prospectus Supplement
with respect to a series of Notes, without the consent of the holder of each
such outstanding Note affected thereby, no supplemental indenture will, among
other things: (i) change the due date of any installment of principal of or
interest on any such Note or reduce the principal amount thereof, the
interest rate specified thereon or the redemption price with respect thereto
or change any place of payment where or the coin or currency in which any
such Note or any interest thereon is payable; (ii) impair the right to
institute suit for the enforcement of certain provisions of the related
Indenture regarding payment; (iii) reduce the percentage of the aggregate
amount of the outstanding Notes of such series, the consent of the holders of
which is required for any such supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with certain
provisions of such Indenture or of certain defaults thereunder and their
consequences as provided for in such Indenture; (iv) modify or alter the
provisions of such Indenture regarding the voting of Notes held by the
applicable Trust, any other obligor on such Notes, the Trust Depositor or an
affiliate of any of them; (v) reduce the percentage of the aggregate
outstanding amount of such Notes, the consent of the holders of which is
required to direct the related Indenture Trustee to sell or liquidate the
Contracts if the proceeds of such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes of
such series; (vi) amend the provisions of the Indenture which specify
the percentage of the aggregate principal amount of such Notes required to
amend certain sections of such Indenture or certain other related
agreements; or (vii) permit the creation of any lien ranking prior to or on a
parity with the lien of such Indenture with respect to any of the collateral
for such Notes or, except as otherwise permitted or contemplated in such
Indenture, terminate the lien of such Indenture on any such collateral or
deprive the holder of any such Note of the security afforded by the lien of
such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, an
Owner Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the Noteholders of
the related series, for the purpose of, among other things, adding any
provisions to or changing in any manner or eliminating any of the provisions
of the related Indenture or of modifying in any manner the rights of such
Noteholders; provided that such action will not materially and adversely
affect the interest of any such Noteholder.
Annual Compliance Statement. Each Owner Trust that issues Notes will be
required to file annually with the related Indenture Trustee a written
statement as to the fulfillment of its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Owner
Trust that issues Notes will be required to mail each year to all related
Noteholders a brief report relating to its eligibility and qualification to
continue as Indenture Trustee under the related Indenture, any amounts
advanced by it under the Indenture, the amount, interest rate and maturity
date of certain indebtedness owing by the related Owner Trust to the
applicable Indenture Trustee in its individual capacity, the property and
funds physically held by such Indenture Trustee as such and any action taken
by it that materially affects the related Notes and that has not been
previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related Notes upon (i) the
delivery to the related Indenture Trustee for cancellation of all such Notes
or, with certain limitations, upon deposit with such Indenture Trustee of
funds sufficient for the payment in full of all such Notes and (ii) the
payment of all amounts and obligations, if any, which the Owner Trust owes to
the Noteholders or Indenture Trustee on behalf of the Noteholders.
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THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may
resign at any time, in which event the related Administrator will be
obligated to appoint a successor Trustee for such series. The Administrator
may also remove any such Indenture Trustee if such Indenture Trustee ceases
to be eligible to continue as such under the related Indenture or if such
Indenture Trustee becomes insolvent. In such circumstances, such Owner Trust
will be obligated to appoint a successor Trustee for the applicable series of
Notes. Any resignation or removal of the Indenture Trustee and appointment of
a successor Trustee for any series of Notes does not become effective until
acceptance of the appointment by the successor Trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the Trust
Depositor, each class of Certificates will initially be represented by one or
more Certificates registered in the name of the Depository, except as set
forth below. Unless otherwise specified in the related Prospectus Supplement
and except for the Certificates, if any, of a given series purchased by the
Trust Depositor, the Certificates will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form
only. The Company has been informed by DTC that DTC's nominee will be Cede,
unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the
Certificates of any series that are not purchased by the Trust Depositor.
Unless and until Definitive Certificates (as defined herein) are issued under
the limited circumstances described herein or in the related Prospectus
Supplement, no Certificateholder (other than the Trust Depositor) will be
entitled to receive a physical certificate representing a Certificate. All
references herein and in the related Prospectus Supplement to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants, and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities -- Book-Entry Registration" and " -- Definitive Securities". Any
Certificates of a given series owned by the Trust Depositor or its affiliates
will be entitled to equal and proportionate benefits under the applicable
Trust Agreement or Pooling and Servicing Agreement, except that such
Certificates will be deemed not to be outstanding for the purpose of
determining whether the requisite percentage of Certificateholders has given
any request, demand, authorization, direction, notice or consent or taken any
other action under the Related Documents (other than the commencement by the
related Trust of a voluntary proceeding in bankruptcy as described under
"Description of the Sale and Servicing Agreements and Pooling and Servicing
Agreements -- Insolvency Event").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of
losses, Pass-Through Rate and amount of or method of determining
distributions with respect to principal of and interest on each class of
Certificates of a given series will be described in the related Prospectus
Supplement. Distributions of interest on such Certificates will be made on
the Distribution Date specified in the related Prospectus Supplement and
will be made prior to distributions with respect to principal of such
Certificates. To the extent provided in the related Prospectus Supplement, a
series may include one or more classes of Strip Certificates entitled to (i)
distributions in respect of principal with disproportionate, nominal or no
interest distributions or (ii) interest distributions with disproportionate,
nominal or no distributions in respect of principal. Each class of
Certificates may have a different Pass-Through Rate, which may be a fixed,
variable or adjustable Pass-Through Rate (and which may be zero for certain
classes of Strip Certificates) or any combination of the foregoing. The
related Prospectus Supplement will specify the Pass-Through Rate for each
class of Certificates of a given series or the method for determining such
Pass-Through Rate. See also "Certain Information Regarding the Securities
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- -- Fixed Rate Securities" and "-- Floating Rate Securities". Unless otherwise
provided in the related Prospectus Supplement, distributions in respect of
the Certificates of a given series that includes Notes may be subordinated to
payments in respect of the Notes of such series as more fully described in
such Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, distributions in respect of interest on and principal
of any class of Certificates will be made on a pro rata basis among all the
Certificateholders of such class.
In the case of a series of Certificates which includes two or more
classes of Certificates, the timing, sequential order, priority of payment or
amount of distributions in respect of interest and principal, and any
schedule or formula or other provisions applicable to the determination
thereof, of each such class shall be as set forth in the related Prospectus
Supplement. One or more classes of Certificates of a series may be redeemable
in whole or in part under the circumstances specified in the related
Prospectus Supplement, including, if a Pre-Funding Account or Collateral
Reinvestment Account has been established with respect to the related series,
from amounts remaining in the applicable account at the end of the Funding
Period or Revolving Period, as the case may be, or as a result of the
exercise by the Seller through the Trust Depositor or such other party as may
be specified in such Prospectus Supplement of its option to repurchase the
related pool of Contracts. See "Description of the Sale and Servicing
Agreements and Pooling and Servicing Agreements -- Termination".
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass-Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth
in the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes -- Principal and Interest on the Notes"
and "Description of the Certificates -- Distributions of Principal and
Interest".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable "Interest Reset Period" (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities) at
a rate per annum determined by reference to an interest rate basis (the "Base
Rate"), plus or minus the Spread, if any, or multiplied by the Spread
Multiplier, if any, in each case as specified in such Prospectus Supplement.
The "Spread" is the number of basis points (one basis point equals one
one-hundredth of a percentage point) that may be specified in the applicable
Prospectus Supplement as being applicable to such class, and the "Spread
Multiplier" is the percentage that may be specified in the applicable
Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a
"LIBOR Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate
Security"), (iii) the Treasury Rate (a "Treasury Rate Security"), (iv) the
Federal Funds Rate (a "Federal Funds Rate Security"), (v) the CD Rate (a "CD
Rate Security") or (vi) such other Base Rate as is set forth in such
Prospectus Supplement. The "Index Maturity" for any class of Floating Rate
Securities is the period of maturity of the instrument or obligation from
which the Base Rate is calculated. "H.15(519)" means the publication entitled
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication, published by the Board of Governors of the Federal Reserve
System. "Composite Quotations" means the daily statistical release entitled
"Composite 3:30 p.m. Quotations for U.S. Government Securities" published by
the Federal Reserve Bank of New York. "Interest Reset Date" will be the first
day of the
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applicable Interest Reset Period, or such other day as may be specified in
the related Prospectus Supplement with respect to a class of Floating Rate
Securities.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or
ceiling, on the rate at which interest may accrue during any interest period
and (ii) a minimum limitation, or floor, on the rate at which interest may
accrue during any interest period. In addition to any maximum interest rate
that may be applicable to any class of Floating Rate Securities, the interest
rate applicable to any class of Floating Rate Securities will in no event be
higher than the maximum rate permitted by applicable law, as the same may be
modified by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class
of Floating Rate Securities issued with respect thereto. The applicable
Prospectus Supplement will set forth the identity of the Calculation Agent
for each such class of Floating Rate Securities of a given series, which may
be either the related Trustee or Indenture Trustee with respect to such
series. All determinations of interest by the Calculation Agent shall, in the
absence of manifest error, be conclusive for all purposes and binding on the
holders of Floating Rate Securities of a given class. Unless otherwise
specified in the applicable Prospectus Supplement, all percentages resulting
from any calculation of the rate of interest on a Floating Rate Security will
be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with
five one-millionths of a percentage point rounded upward.
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the
CD Rate (as defined herein) and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
The "CD Rate" for each Interest Reset Period shall be the rate as of the
second business day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of
deposit having the Index Maturity designated in the applicable Prospectus
Supplement as published in H.15(519) under the heading "CDs (Secondary
Market)". In the event that such rate is not published prior to 3:00 p.m.,
New York City time, on the Calculation Date (as defined below) pertaining to
such CD Rate Determination Date, then the "CD Rate" for such Interest Reset
Period will be the rate on such CD Rate Determination Date for negotiable
certificates of deposit of the Index Maturity designated in the applicable
Prospectus Supplement as published in Composite Quotations under the heading
"Certificates of Deposit". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "CD Rate" for such Interest Reset Period will
be calculated by the Calculation Agent for such CD Rate Security and will be
the arithmetic mean of the secondary market offered rates as of 10:00 a.m.,
New York City time, on such CD Rate Determination Date, of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in The City
of New York selected by the Calculation Agent for such CD Rate Security for
negotiable certificates of deposit of major United States money center banks
of the highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated
in the related Prospectus Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by such
Calculation Agent are not quoting offered rates as mentioned in this
sentence, the "CD Rate" for such Interest Reset Period will be the same as
the CD Rate for the immediately preceding Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset
Date.
COMMERCIAL PAPER RATE SECURITIES. Each Commercial Paper Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Commercial Paper Rate (as defined
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herein) and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
The "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Rate Security
as of the second business day prior to the Interest Reset Date for such
Interest Reset Period (a "Commercial Paper Rate Determination Date") and
shall be the Money Market Yield (as defined below) on such Commercial Paper
Rate Determination Date of the rate for commercial paper having the Index
Maturity specified in the applicable Prospectus Supplement, as such rate
shall be published in H.15(519) under the heading "Commercial Paper". In the
event that such rate is not published prior to 3:00 p.m., New York City time,
on the Calculation Date (as defined below) pertaining to such Commercial
Paper Rate Determination Date, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield on such Commercial
Paper Rate Determination Date of the rate for commercial paper of the
specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Commercial Paper Rate" for such Interest
Reset Period shall be the Money Market Yield of the arithmetic mean of the
offered rates, as of 11:00 a.m., New York City time, on such Commercial Paper
Rate Determination Date of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent for such Commercial Paper
Rate Security for commercial paper of the specified Index Maturity placed for
an industrial issuer whose bonds are rated "AA" or the equivalent by a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting offered rates
as mentioned in this sentence, the "Commercial Paper Rate" for such Interest
Reset Period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = ------------------------- X 100
360--(D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the date any payment is required to be made for any period
following the applicable Interest Reset Date.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Federal Funds Rate (as defined herein) and the Spread
or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
The "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)". In the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Federal Funds Rate
Determination Date, the "Federal Funds Rate" for such Interest Reset Period
shall be the rate on such Federal Funds Rate Determination Date as published
in Composite Quotations under the heading "Federal Funds/Effective Rate". If
by 3:00 p.m., New York City time, on such Calculation Date such rate is not
yet published in either H.15(519) or Composite Quotations, then the "Federal
Funds Rate" for such Interest Reset Period shall be the rate on such Federal
Funds Rate Determination Date made publicly available by the Federal Reserve
Bank of New York which is equivalent to the rate which appears in H.15(519)
under the heading "Federal Funds (Effective)"; provided, however, that if
such rate is not made publicly available by the Federal Reserve Bank of New
York
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by 3:00 p.m., New York City time, on such Calculation Date, the "Federal
Funds Rate" for such Interest Reset Period will be the same as the Federal
Funds Rate in effect for the immediately preceding Interest Reset Period. In
the case of a Federal Funds Rate Security that resets daily, the interest
rate on such Security for the period from and including a Monday to but
excluding the succeeding Monday will be reset by the Calculation Agent for
such Security on such second Monday (or, if not a business day, on the next
succeeding business day) to a rate equal to the average of the Federal Funds
Rates in effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding business day.
LIBOR SECURITIES. Each LIBOR Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to LIBOR
(as defined herein) and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S. dollar
deposits, "LIBOR" for each Interest Reset Period will be established by the
Calculation Agent for any LIBOR Security and will equal the offered rate for
United States dollar deposits for one month that appears on Telerate Page
3750 as of 11:00 a.m., London time, on the second LIBOR Business Day (as
defined herein) prior to the Interest Reset Date for such Interest Reset
Period (the "LIBOR Determination Date"). "Telerate Page 3750" means the
display page so designated on the Dow Jones Telerate Service (or such other
page as may replace that page on that service or such other service as may be
nominated by the information vendor for the purpose of displaying London
interbank offered rates of major banks). If such rate appears on Telerate
Page 3750 on a LIBOR Determination Date, LIBOR for the related Interest Reset
Period will be such rate. If on any LIBOR Determination Date such offered
rate does not appear on Telerate Page 3750, the Calculation Agent will
request each of the reference banks (which will be major banks that are
engaged in transactions in the London interbank market selected by the
Calculation Agent) to provide the Calculation Agent with its offered
quotation for United States dollar deposits for one month to prime banks in
the London interbank market as of 11:00 a.m., London time, on such date. If
at least two reference banks provide the Calculation Agent with such offered
quotations, LIBOR with respect to such date will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth of one percent)
of all such quotations. If on such date fewer than two of the reference banks
provide the Calculation Agent with such offered quotations, LIBOR with
respect to such date will be the arithmetic mean (rounded upwards, if
necessary, to the nearest one-sixteenth of one percent) of the offered per
annum rates that one or more leading banks in The City of New York selected
by the Calculation Agent are quoting as of 11:00 a.m., New York City time, on
such date to leading European banks for United States dollar deposits for one
month; provided, however, that if such banks are not quoting as described
above, LIBOR with respect to such date will be LIBOR applicable to the
immediately preceding Interest Reset Period. "LIBOR Business Day" as used
herein means a day that is both a business day and a day on which banking
institutions in the City of London, England are not required or authorized by
law to be closed.
TREASURY RATE SECURITIES. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference
to the Treasury Rate (as defined herein) and the Spread or Spread Multiplier,
if any, specified in such Security and in the applicable Prospectus
Supplement.
The "Treasury Rate" for each Interest Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for
such Interest Reset Period of direct obligations of the United States
("Treasury bills") having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Securities -- Treasury bills -- auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Treasury Rate Determination Date (as defined herein), the
auction average rate (expressed as a bond equivalent on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis) on such
Treasury Rate Determination Date as otherwise announced by the United States
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Department of the Treasury. In the event that the results of the auction of
Treasury bills having the specified Index Maturity are not published or
reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate Security
and shall be the yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government
securities dealers selected by such Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the specified Index
Maturity; provided, however, that if the dealers selected as aforesaid by
such Calculation Agent are not quoting bid rates as mentioned in this
sentence, then the "Treasury Rate" for such Interest Reset Period will be the
same as the Treasury Rate for the immediately preceding Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period
will be the day of the week in which the Interest Reset Date for such
Interest Reset Period falls on which Treasury bills would normally be
auctioned. Treasury bills are normally sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held
on the preceding Friday. If, as the result of a legal holiday, an auction is
so held on the preceding Friday, such Friday will be the Treasury Rate
Determination Date pertaining to the Interest Reset Period commencing in the
next succeeding week. If an auction date shall fall on any day that would
otherwise be an Interest Reset Date for a Treasury Rate Security, then such
Interest Reset Date shall instead be the business day immediately following
such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding the date any
payment is required to be made for any period following the applicable
Interest Reset Date.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, DTC will
act as securities depository for each class of Securities offered hereby.
Each class of Securities initially will be represented by one or more
certificates registered in the name of Cede, the nominee of DTC. As such, it
is anticipated that the only "Noteholder" and/or "Certificateholder" with
respect to a series of Securities will be Cede, as nominee of DTC. Beneficial
owners of the Securities ("Security Owners") will not be recognized by the
related Indenture Trustee as "Noteholders", as such term is used in each
Indenture, or by the related Trustee as "Certificateholders", as such term is
used in each Trust Agreement and Pooling and Servicing Agreement, and
Security Owners will be permitted to exercise the rights of Noteholders or
Certificateholders only indirectly through DTC and its Participants.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code as in effect
in the State of New York, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for the Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the DTC system
also is available to banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Unless otherwise specified in the related Prospectus Supplement, Security
Owners that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or an
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interest in, the Securities may do so only through Participants and
Indirect Participants. In addition, all Security Owners will receive all
distributions of principal and interest from the related Indenture Trustee or
the related Trustee, as applicable, through Participants. Under a book-entry
format, Security Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Applicable Trustee to
DTC's nominee. DTC will then forward such payments to the Participants, which
thereafter will forward them to Indirect Participants or Security Owners.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry
transfers among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of and
interest on the Securities. Participants and Indirect Participants with which
Security Owners have accounts with respect to the Securities similarly are
required to make book-entry transfers and to receive and transmit such
payments on behalf of their respective Security Owners. Accordingly, although
Security Owners will not possess physical certificates representing the
Securities, the Rules provide a mechanism by which Participants and Indirect
Participants will receive payments and transfer interests, directly or
indirectly, on behalf of Security Owners.
Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge Securities to persons or entities that do not participate in
the DTC system, or otherwise take actions with respect to such Securities,
may be limited due to the lack of a physical certificate representing such
Securities.
DTC has advised the Company that it will take any action permitted to be
taken by a Security Owner under the Indenture, Trust Agreement or Pooling and
Servicing Agreement, as applicable, only at the direction of one or more
Participants to whose account with DTC the Securities are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Except as required by law, none of the Trust Depositor, the Servicer, the
related Administrator or the Applicable Trustee will have any liability for
any aspect of the records relating to or payments made on account of
beneficial ownership interests of Securities of any series held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the
Notes, if any, and the Certificates of a given series will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive
Certificates", respectively, and collectively referred to herein as
"Definitive Securities") to Noteholders or Certificateholders or their
respective nominees, rather than to DTC or its nominee, only if (i) the
related Administrator of an Owner Trust or Trustee of a Grantor Trust,
as applicable, determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities
and such Administrator or Trustee is unable to locate a qualified successor
(and if it is an Administrator that has made such determination, such
Administrator so notifies the Applicable Trustee in writing), (ii) the
Administrator or Trustee, as applicable, at its option, elects to terminate
the book-entry system through DTC or (iii) after the occurrence of an Event
of Default or a Servicer Default with respect to such Securities, Security
Owners representing at least a majority of the outstanding principal amount
of the Notes or the Certificates, as the case may be, of such series advise
the Applicable Trustee through DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) with respect to such
Notes or Certificates is no longer in the best interest of the related
Security Owners.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC or the Applicable Trustee will be required to notify all
applicable Security Owners of a given series through Participants of the
availability of Definitive Securities. Upon surrender by DTC of the
definitive certificates representing the corresponding Securities and receipt
of instructions for re-registration, the Applicable Trustee will reissue such
Securities as Definitive Securities to such Security Owners.
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Distributions of principal of, and interest on, such Definitive
Securities will thereafter be made by the Applicable Trustee in accordance
with the procedures set forth in the related Indenture or the related Trust
Agreement or Pooling and Servicing Agreement, as applicable, directly to
holders of Definitive Securities in whose names the Definitive Securities
were registered at the close of business on the applicable Record Date
specified for such Securities in the related Prospectus Supplement. Such
distributions will be made by check mailed to the address of such holder as
it appears on the register maintained by the Applicable Trustee. The final
payment on any such Definitive Security, however, will be made only upon
presentation and surrender of such Definitive Security at the office or
agency specified in the notice of final distribution to the applicable
Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the Applicable Trustee or of a registrar named in a notice
delivered to holders of Definitive Securities. No service charge will be
imposed for any registration of transfer or exchange, but the Applicable
Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or
prior to each Distribution Date, the Servicer will prepare and provide to the
related Indenture Trustee a statement to be delivered to the related
Noteholders on such Distribution Date, and on or prior to each Distribution
Date, the Servicer will prepare and provide to the related Trustee a
statement to be delivered to the related Certificateholders. With respect to
each series of Securities, each such statement to be delivered to Noteholders
will include (to the extent applicable) the following information (and any
other information so specified in the related Prospectus Supplement) as to
the Notes of such series with respect to such Distribution Date or the period
since the previous Distribution Date, as applicable, and each such statement
to be delivered to Certificateholders will include (to the extent applicable)
the following information (and any other information so specified in such
Prospectus Supplement) as to the Certificates of such series with respect to
such Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of each class
of such Notes and to the Certificate Balance of each class of such
Certificates;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Due Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each as of the
related record date;
(v) the amount of the Servicing Fee paid to the Servicer with respect
to the related Due Period or Due Periods, as the case may be;
(vi) the Interest Rate or Pass-Through Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
(vii) the amount of the aggregate realized losses, if any, for the
related Due Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
such term, if applicable, as defined in the related Prospectus Supplement),
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if any, in each case as applicable to each class of Securities, and the
change in such amounts from the preceding statement;
(ix) the aggregate Purchase Amounts for Contracts, if any, that were
repurchased in the related Due Period;
(x) the balance of the Reserve Fund (if any) on such date, after giving
effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount;
(xii) for the first such date that is on or immediately following the
end of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been used to fund the purchase of Subsequent Contracts
and is being passed through as payments of principal on the Securities of
such series;
(xiii) for each such date during the Revolving Period (if any), the
remaining amount in the Collateral Reinvestment Account; and
(xiv) for the first such date that is on or immediately following the
end of the Revolving Period (if any), the amount remaining in the
Collateral Reinvestment Account that has not been used to fund the
purchase of Subsequent Contracts and is being passed through as payments
of principal on the Securities of such series.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable
Trustee will mail to each person who at any time during such calendar year
has been a registered Securityholder with respect to such Trust and received
any payment thereon a statement containing certain information for the
purposes of such Securityholder's preparation of federal income tax returns.
See "Federal Income Tax Consequences".
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, three or more holders of the Notes of
such series may, by written request to the related Indenture Trustee,
obtain access to the list of all Noteholders maintained by such Indenture
Trustee for the purpose of communicating with other Noteholders with respect
to their rights under the related Indenture or under such Notes. Such
Indenture Trustee may elect not to afford the requesting Noteholders access
to the list of Noteholders if it agrees to mail the desired communication or
proxy, on behalf of and at the expense of the requesting Noteholders, to all
Noteholders of such series.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series, three or more holders of the
Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such Certificates
may, by written request to the related Trustee, obtain access to the list of
all Certificateholders maintained by such Trustee for the purpose of
communicating with other Certificateholders with respect to their rights
under the related Trust Agreement or Pooling and Servicing Agreement or under
such Certificates.
DESCRIPTION OF THE TRANSFER AND SALE AGREEMENTS
On the Closing Date specified with respect to any given Trust in the
related Prospectus Supplement, the Company as Seller will transfer and assign
to the applicable Trust, pursuant to a Transfer and Sale Agreement, its
entire interest in the Initial Contracts, including its security interests in
the related Motorcycles.
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Each such Contract will be identified in a schedule appearing as an exhibit
to such Transfer and Sale Agreement (a "Schedule of Contracts"). The Seller
will make certain representations and warranties in the Transfer and Sale
Agreement with respect to each Contract, including that (references to the
Closing Date below being deemed, in respect of Subsequent Contracts, to refer
to the related Subsequent Transfer Date): (a) as of the related Cutoff Date
the most recent scheduled payment was made or was not delinquent more than 30
days and, to the best of the Seller's knowledge, all payments on the Contract
were made by the Obligor of the Contract; (b) as of the Closing Date no
provision of a Contract has been waived, altered or modified in any respect,
except by instruments or documents relating to the Contract and contained in
the files maintained in connection therewith; (c) each Contract is a genuine,
legal, valid and binding obligation of the Obligor and is enforceable in
accordance with its terms (except as may be limited by laws affecting
creditors' rights generally); (d) as of the Closing Date no Contract is
subject to any right of rescission, set-off, counterclaim or defense; (e) as
of the Closing Date each Motorcycle securing a Contract is covered by certain
insurance policies described under "--Individual Motorcycle Insurance" below;
(f) each Contract was originated by a Dealer in the ordinary course of such
Dealer's business which Dealer had all necessary licenses and permits to
originate the Contracts in the state where such Dealer was located, was fully
and properly executed by the parties thereto and was sold by such Dealer to
the Seller without any fraud or misrepresentation on the part of such Dealer;
(g) no Contract was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer, sale and assignment of the
Contract unlawful, void or voidable; (h) each Contract and each sale of the
related Motorcycle complies with all requirements of any applicable federal,
state or local law and regulations thereunder, including, without limitation,
usury, truth in lending, motor vehicle installment loan and equal credit
opportunity laws, with such compliance not being affected by the Trust
Depositor's conveyance and assignment of the Contracts to the Trust, or the
Trust's pledge of the Contracts to the Indenture Trustee, as applicable, and
the Seller will maintain in its possession, available for inspection by or
delivery to the Trust Depositor and the Applicable Trustee, evidence of
compliance with all such requirements; (i) as of the Closing Date no Contract
has been satisfied, subordinated in whole or in part or rescinded and the
Motorcycle securing the Contract has not been released from the lien of the
Contract in whole or in part; (j) each Contract creates a valid, subsisting
and enforceable first priority security interest in favor of the Seller in
the Motorcycle covered thereby; such security interest has been conveyed and
assigned by the Seller to the Trust Depositor and by the Trust Depositor to
the Trust and, if applicable, pledged by the Trust to the Indenture Trustee;
the Seller's lien is recorded on the original certificate of title,
certificate of lien or other notification (the "Lien Certificate") issued by
the body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon (the
"Registrar of Titles") of the applicable state to a secured party which
indicates the lien of the secured party on the Motorcycle; and the original
certificate of title for each Motorcycle shows, or if a new or replacement
Lien Certificate is being applied for with respect to such Motorcycle the
Lien Certificate will be received within 180 days of the Closing Date and
will show, the Seller as original secured party under each Contract and as
the holder of a first priority security interest in such Motorcycle (and with
respect to each Contract for which the Lien Certificate has not yet been
returned from the Registrar of Titles, the Seller has received written
evidence from the related dealer that such Lien Certificate showing the
Seller as lienholder has been applied for) and the Seller's security interest
has been validly assigned by the Seller to the Trust Depositor and by the
Trust Depositor to the Trust and (if applicable) pledged by the Trust to the
Indenture Trustee, in order that immediately after the sale, each Contract
will be secured by an enforceable and perfected first priority security
interest in the Motorcycle in favor of the Applicable Trustee as secured
party, which security interest is prior to all other liens upon and security
interests in such Motorcycle which now exist or may hereafter arise or be
created (except, as to priority, for any lien for taxes, labor, materials or
any state law enforcement agency affecting a Motorcycle which may arise after
such sale); (k) all parties to each Contract had capacity to execute such
Contract; (l) no Contract has been sold, conveyed and assigned or pledged to
any other person other than the Trust Depositor, as transferee of the Seller,
the Trust as transferee of the Trust Depositor or the Indenture Trustee as
pledgee of the Trust, and prior to the transfer of the Contract to the Trust
Depositor the Seller has good and marketable title to each Contract free and
clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest, and as of the Closing Date the Applicable Trustee will have a first
priority perfected security interest therein; (m) as of the related Cutoff
Date there was no default, breach, violation or event permitting acceleration
under any Contract (except for payment delinquencies permitted by clause (a)
above), no event which with notice and the expiration of any grace or cure
period would constitute a default, breach, violation or event permitting
acceleration under such Contract, and the Seller has not waived
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any of the foregoing; (n) as of the Closing Date there are, to the best of
the Seller's knowledge, no liens or claims which have been filed for work,
labor or materials affecting a motorcycle securing a Contract, which are or
may be liens prior or equal to the lien of the Contract; (o) each Contract
has a fixed rate of interest and provides for monthly payments of principal
and interest which, if timely made, would fully amortize the loan on a simple
interest basis over its term; (p) each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral of the
benefits of the security; (q) the description of each Contract set forth in
the list delivered to the Applicable Trustee, is true and correct, and (r)
there is only one original of each Contract. The Seller will also make
certain representations and warranties with respect to the Contracts in the
aggregate, including that (i) the aggregate principal amount payable by the
Obligors as of the Initial Cutoff Date (plus the Pre-Funded Amount as of the
Closing Date) equals the sum of the initial principal amount of the Notes and
the Initial Certificate Principal Balance, and each Initial Contract has a
minimum contractual rate of interest, (ii) all Motorcycles securing the
Contracts are Harley-Davidson or Buell Motorcycles or Motorcycles of Other
Manufacturers, (iii) a minimum percentage of the aggregate principal balance
of the Initial Contracts is attributable to loans to purchase new Motorcycles
and a maximum percentage of the aggregate Principal Balance of the Initial
Contracts is attributable to loans to purchase used Motorcycles, (iv) no
Initial Contract has a remaining maturity of more than 72 months, and
(v) no adverse selection procedures were or will be employed in selecting the
Contracts from the Seller's portfolio.
Under the Transfer and Sale Agreements, the Seller will agree that in
the event of a breach of any such representations and warranties made by the
Seller that materially and adversely affects the Applicable Trustees'
interest in any Contract the Seller will repurchase such Contract not later
than two days prior to the first Determination Date (as defined herein) after
the Seller becomes aware of such breach at a price (the "Purchase Amount")
equal to the outstanding principal balance on such Contract, plus accrued
interest thereon through the most recently ended Due Period, unless such
breach is cured. Under either the Sale and Servicing Agreements or the
Pooling and Servicing Agreements, as applicable, the Trust Depositor will
assign all of its right, title and interest in such representations and
warranties (including the Seller's repurchase obligations) to the Trustee or
the Owner Trust, as applicable. Under the Indenture, if any, the Trust will
pledge its right, title and interest in such representations and warranties
to the Indenture Trustee. The Seller is selling the Contracts without
recourse and, accordingly, will have no obligation with respect to the
Contracts other than pursuant to such representations, warranties and
repurchase obligations. The repurchase obligations of the Seller described
above will constitute the sole remedy against the Seller by the Trust and the
Securityholders for a breach of any such representations and warranties made
by the Seller.
DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND
POOLING AND SERVICING AGREEMENTS
The following summary describes certain terms of (i) each Sale and
Servicing Agreement or Pooling and Servicing Agreement pursuant to which a
Trust will purchase Contracts and other Trust Property from the Trust
Depositor and the Servicer will agree to service such Contracts, (ii) each
Trust Agreement or Pooling and Servicing Agreement, as applicable, pursuant
to which a Trust will be created and Certificates will be issued and (iii)
each Administration Agreement pursuant to which the Company will undertake
certain administrative duties with respect to an Owner Trust that issues
Notes (collectively, the "Sale and Servicing Agreements and Pooling and
Servicing Agreements"). Forms of the Sale and Servicing Agreements and
Pooling and Servicing Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
SALE AND ASSIGNMENT OF CONTRACTS
The Applicable Trustee will, concurrently with such transfer and
assignment, execute and deliver the related Notes and/or Certificates. Unless
otherwise provided in the related Prospectus Supplement, the net proceeds
received from the sale of the Certificates and the Notes of a given series
will be applied to the purchase of the related Initial Contracts and other
Trust Property from the Trust Depositor and, to the extent specified in such
Prospectus Supplement, to the deposit of the Pre-Funded Amount into the
Pre-Funding Account and
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the initial deposit into the Collateral Reinvestment Account. The related
Prospectus Supplement for a given Trust will specify whether, and the terms,
conditions and manner under which, Subsequent Contracts will be sold by the
Trust Depositor to the applicable Trust from time to time during any Funding
Period or Revolving Period on each Subsequent Transfer Date as specified in
the related Prospectus Supplement.
In each Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Trust Depositor will represent and warrant to the applicable Trust, among
other things, that: (i) the information provided in the related Schedule of
Contracts is correct in all material respects as of the applicable Cutoff
Date; (ii) the Obligor on each related Contract is required to maintain
physical damage insurance covering the Motorcycle in accordance with the
Trust Depositor's normal requirements; (iii) as of the applicable Closing
Date or the applicable Subsequent Transfer Date, if any, to the best of its
knowledge, the related Contracts are free and clear of all security
interests, liens, charges and encumbrances and no offsets, defenses or
counterclaims have been asserted or threatened; (iv) as of the Closing Date
or the applicable Subsequent Transfer Date, if any, each of such Contracts is
or will be secured by a first priority perfected security interest in favor
of the Trust Depositor in the Motorcycle; and (v) each related Contract, at
the time it was originated, complied and, as of the Closing Date or the
applicable Subsequent Transfer Date, if any, complies in all material
respects with applicable federal and state laws, including, without
limitation, consumer credit, truth in lending, equal credit opportunity and
disclosure laws; and the Trust Depositor will make any other representations
and warranties that may be set forth in the related Prospectus Supplement.
Such representations and warranties will be concurrently made by the Seller
under the related Transfer and Sale Agreement, and the Seller has agreed to
repurchase Contracts adversely affected by the incorrectness of such
representations and warranties, in the manner described in "Description of
the Transfer and Sale Agreement" above.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Contracts and to reduce
administrative costs, the Trust Depositor and each Trust will designate the
Servicer as custodian to maintain possession, as such Trust's agent, of the
related motor vehicle retail installment sale contracts and installment loans
and any other documents relating to the Contracts. The Trust Depositor's and
the Servicer's accounting records and computer systems will reflect the sale
and assignment of the related Contracts to the applicable Trust, and UCC
financing statements reflecting such sale and assignment will be filed.
ACCOUNTS
With respect to Owner Trusts that issue Notes, the Servicer will
establish and maintain with the related Indenture Trustee one or more
accounts, in the name of the Indenture Trustee on behalf of the related
Noteholders and Certificateholders, into which all payments made on or with
respect to the related Contracts will be deposited (the "Collection
Account"). The Servicer will establish and maintain with such Indenture
Trustee an account, in the name of such Indenture Trustee on behalf of such
Noteholders, into which amounts released from the Collection Account and any
Pre-Funding Account, Collateral Reinvestment Account, Reserve Fund or other
credit enhancement for payment to such Noteholders will be deposited and from
which all distributions to such Noteholders will be made (the "Note
Distribution Account"). With respect to each Owner Trust or Grantor
Trust, the Servicer will establish and maintain with the related Trustee an
account, in the name of such Trustee on behalf of the Certificateholders of
such Trust, into which amounts released from the Collection Account and any
Pre-Funding Account, any Collateral Reinvestment Account, Reserve Fund or
other credit or cash flow enhancement for distribution to such
Certificateholders will be deposited and from which all distributions to such
Certificateholders will be made (the "Certificate Distribution Account").
With respect to each Grantor Trust or each Owner Trust that does not
issue Notes, the Servicer will also establish and maintain the Collection
Account and any other Trust Account (as defined herein) in the name of the
related Trustee on behalf of the related Certificateholders.
If so provided in the related Prospectus Supplement, the Trust Depositor
will establish and maintain a Pre-Funding Account, in the name of the related
Indenture Trustee on behalf of the related Securityholders, into which the
Trust Depositor will deposit the Pre-Funded Amount on the related Closing
Date. The Pre-Funded Amount will not exceed 40% of the initial aggregate
principal amount of the Notes and Certificates of the related series.
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In addition, if so provided in the related Prospectus Supplement, the Trust
Depositor will establish and maintain a Collateral Reinvestment Account, in
the name of the related Indenture Trustee on behalf of the related
Securityholders, into which the Trust Depositor will deposit the amount, if
any, specified in such Prospectus Supplement. During the Revolving Period,
principal will not be distributed on the Securities of the related series,
and principal collections, together with (if and to the extent described in
the related Prospectus Supplement) interest collections on the Contracts that
are in excess of amounts required to be distributed therefrom, will be
deposited from time to time in the Collateral Reinvestment Account. The
Pre-Funded Amount and the amounts on deposit in the Collateral Reinvestment
Account will be used by the related Indenture Trustee to purchase Subsequent
Contracts from the Trust Depositor from time to time during the Funding
Period and Revolving Period, respectively. See "The Contracts--General" and
"Risk Factors--Sales of Subsequent Contracts and Effect on Pool
Characterisitcs". The amounts on deposit in the Pre-Funding Account during
the Funding Period and the amount on deposit in the Collateral Reinvestment
Account will be invested by the Indenture Trustee in Eligible Investments.
Any Investment Income received on the Eligible Investments during a Due
Period will be included in the interest distribution amount on the following
Distribution Date. The Funding Period or Revolving Period, if any, for a
Trust will begin on the related Closing Date and will end on the date
specified in the related Prospectus Supplement, which, in the case of the
Funding Period, in no event will be later than the date that is one year
after such Closing Date. Any amounts remaining in the Pre-Funding Account at
the end of the Funding Period or in the Collateral Reinvestment Account at
the end of the Revolving Period will be distributed to the related
Securityholders in the manner and priority specified in the related
Prospectus Supplement, as a prepayment of principal of the related Securities.
Any other accounts to be established with respect to a Trust, including
any Reserve Fund, will be described in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account, if any, any Pre-Funding Account, any Collateral
Reinvestment Account, any Reserve Fund and other accounts identified as such
in the related Prospectus Supplement (collectively, the "Trust Accounts") and
the Certificate Distribution Account will be invested as provided in the
related Sale and Servicing Agreement or Pooling and Servicing Agreement in
Eligible Investments. "Eligible Investments" means any one or more of the
following types of investments: (a) (i) direct interest-bearing obligations
of, and interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the United States or any agency or instrumentality
of the United States the obligations of which are backed by the full faith
and credit of the United States; and (ii) direct interest-bearing obligations
of, and interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation, but only if, at the time of
investment, such obligations are assigned the highest credit rating by each
Rating Agency; and (b) demand or time deposits in, certificates of deposit
of, or bankers' acceptances issued by any depositary institution or trust
company organized under the laws of the United States or any State and
subject to supervision and examination by federal and/or State banking
authorities (including, if applicable, the Trustee or any agent of the
Trustee acting in their respective commercial capacities); provided that the
short-term unsecured debt obligations of such depositary institution or trust
company at the time of such investment, or contractual commitment providing
for such investment, are assigned the highest credit rating by each Rating
Agency. Except as described below or in the related Prospectus Supplement,
Eligible Investments are limited to obligations or securities that mature on
or before the date of the next distribution for such series. However, to the
extent permitted by the Rating Agencies, funds in any Reserve Fund may be
invested in securities that will not mature prior to the date of the next
distribution with respect to such Certificates or Notes and will not be sold
to meet any shortfalls. Thus, the amount of cash in any Reserve Fund at any
time may be less than the balance of the Reserve Fund. If the amount required
to be withdrawn from any Reserve Fund to cover shortfalls in collections on
the related Contracts (as provided in the related Prospectus Supplement)
exceeds the amount of cash in the Reserve Fund, a temporary shortfall in the
amounts distributed to the related Noteholders or Certificateholders could
result, which could, in turn, increase the average life of the Notes or the
Certificates of such series. Except as otherwise specified in the related
Prospectus Supplement, investment earnings on funds deposited in the Trust
Accounts, net of losses and investment expenses (collectively, "Investment
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Earnings"), shall be deposited in the applicable Collection Account on each
Distribution Date and shall be treated as collections of interest on the
related Contracts.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means a segregated direct deposit account
maintained with a depository institution or trust company organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia having a certificate of deposit, short-term deposit or
commercial paper rating of at least A-1+ by Standard & Poor's Ratings
Services and P-1 by Moody's Investors Service, Inc.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due
with respect to the Contracts held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement,
follow such collection procedures as it follows with respect to comparable
motor vehicle retail installment sale contracts and installment loans it
services for itself or others. The Servicer's collection efforts include
having personnel call a delinquent Obligor every third day in the event such
Obligor is twelve to less than sixty days delinquent, every other day in the
event the Obligor is greater than sixty days delinquent and every day in the
event the Obligor is greater than ninety days delinquent. The Servicer's
general approach is to restructure a delinquent loan as opposed to
repossessing the associated Motorcycle; however, the Servicer's approach with
respect to a specific Obligor is affected by the Obligor's responsiveness and
attitude. Consistent with this approach, the Servicer may, in its discretion,
arrange with the Obligor on a Contract to extend or modify the payment
schedule, but no such arrangement will, for purposes of any Sale and
Servicing Agreement or Pooling and Servicing Agreement, modify the original
due dates or the amount of the scheduled payments or extend the final payment
date of any Contract beyond the last day of the Due Period relating to the
latest maturity date (as specified with respect to the pool of Contracts in
the related Prospectus Supplement). Some of such arrangements may result in
the Servicer purchasing the Contract for the Purchase Amount, while others
may result in the Servicer making Advances. The Servicer may sell the
Motorcycle securing the respective Contract at public or private sale, or
take any other action permitted by applicable law. See "Certain Legal Aspects
of the Contracts".
If so specified in the related Prospectus Supplement, a "backup servicer"
may be appointed and assigned certain oversight servicing responsibilities
with respect to the Contracts. The identity of any backup servicer, as well
as a description of its responsibilities, of any fees payable to such backup
servicer and the source of payment of such fees, will be included in the
related Prospectus Supplement.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Contracts (from whatever source) and all proceeds of such Contracts
collected during each collection period specified in the related Prospectus
Supplement (each, a "Due Period") into the related Collection Account
within two business days after receipt thereof.
ADVANCES
The Servicer is obligated to advance each month an amount equal to
accrued and unpaid interest on the Contracts which was delinquent with
respect to the related Due Period, but only to the extent that the Servicer
believes that the amount of such Advance will be recoverable from collections
on the Contracts. The Servicer will deposit any Advances in the Collection
Account no later than the day preceding the Distribution Date. The Servicer
will be entitled to recoup Advances on a Contract by means of a high
priority withdrawal from the sum of the interest and principal available for
distribution as provided in the related Prospectus Supplement on any
Distribution Date.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to
any Trust, the Servicer will be entitled to receive a servicing fee for each
Due Period in an amount equal to specified percentage per annum (as set forth
in the related Prospectus Supplement, the "Servicing Fee Rate") of the Pool
Balance as of the first day of the related Due Period (the "Servicing Fee").
The Servicing Fee (together with any portion of the Servicing Fee that
remains unpaid from prior Distribution Dates) will be paid solely to the
extent of the Available Interest (as defined in the related Prospectus
Supplement). However, the Servicing Fee will be paid prior to the
distribution of any portion of the Available Interest to the Noteholders or
the Certificateholders of the given series.
Unless otherwise provided in the related Prospectus Supplement with
respect to a given Trust, the Servicer will also collect and retain any late
fees, prepayment charges and other administrative fees or similar charges
allowed by applicable law with respect to the related Contracts and will be
entitled to reimbursement from such Trust for certain liabilities. Payments
by or on behalf of Obligors will be allocated to scheduled payments and late
fees and other charges in accordance with the Servicer's normal practices and
procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of motorcycle Contracts as an agent for
their beneficial owner, including collecting and posting all payments,
responding to inquiries of Obligors on the Contracts, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information
to Obligors, paying costs of collections and disposition of defaults and
policing the collateral. The Servicing Fee also will compensate the Servicer
for performing additional administrative services on behalf of a given Trust,
including making Advances, accounting for collections and furnishing monthly
and annual statements to the related Trustee and Indenture Trustee with
respect to distributions and generating federal income tax information for
such Trust and for the related Noteholders and Certificateholders. The
Servicing Fee also will reimburse the Servicer for certain taxes, the fees of
the related Trustee and Indenture Trustee, if any, accounting fees, outside
auditor fees, data processing costs and other costs incurred in connection
with administering the Contracts relating to such Trust.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of
principal and interest (or, where applicable, of principal or interest only)
on each class of such Securities entitled thereto will be made by the
Applicable Trustee to the Noteholders and the Certificateholders of such
series. The timing, calculation, allocation, order, source and priorities of,
and the requirements for, all payments to the holders of each class of Notes,
if any, and all distributions to the holders of each class of Certificates of
such series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date collections on the
related Contracts will be transferred from the Collection Account to the Note
Distribution Account, if any, and the Certificate Distribution Account for
distribution to Noteholders, if any, and Certificateholders to the extent
provided in the related Prospectus Supplement. Credit enhancement, such as a
Reserve Fund, will be available to cover any shortfalls in the amount
available for distribution on such date to the extent specified in the
related Prospectus Supplement. As more fully described in the related
Prospectus Supplement, and unless otherwise specified therein, distributions
in respect of principal of a class of Securities of a given series will be
subordinated to distributions in respect of interest on such class, and
distributions in respect of one or more classes of Certificates of such
series may be subordinated to payments in respect of Notes, if any, of such
series or to distributions in respect of other classes of Certificates of
such series. Distributions of principal on the Securities of a series may be
based on the amount of principal collected or due, or the amount of realized
losses incurred, in a Due Period.
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CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements,
if any, and the provider thereof, if applicable, with respect to each class
of Securities of a given series will be set forth in the related Prospectus
Supplement. If and to the extent provided in the related Prospectus
Supplement, credit and cash flow enhancement may be in the form of
subordination of one or more classes of Securities, Reserve Funds, spread
accounts, overcollateralization, letters of credit, credit or liquidity
facilities, surety bonds, insurance policies, guaranteed investment
contracts, swaps or other interest rate protection agreements, repurchase
obligations, yield supplement agreements, other agreements with respect to
third party payments or other support, cash deposits or such other
arrangements as may be described in such Prospectus Supplement, or any
combination of two or more of the foregoing. If specified in the applicable
Prospectus Supplement, credit or cash flow enhancement for a class of
Securities may cover one or more other classes of Securities of the same
series, and credit or cash flow enhancement for a series of Securities may
cover one or more other series of Securities.
The presence of a Reserve Fund and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the
full amount of principal and interest due thereon and to decrease the
likelihood that such Securityholders will experience losses. Unless otherwise
specified in the related Prospectus Supplement, the credit enhancement for a
class or series of Securities will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance and
interest thereon. If losses occur which exceed the amount covered by any
credit enhancement or which are not covered by any credit enhancement,
Securityholders of any class or series will bear their allocable share of
deficiencies, as described in the related Prospectus Supplement. In addition,
if a form of credit enhancement covers more than one series of Securities,
Securityholders of any such series will be subject to the risk that such
credit enhancement will be exhausted by the claims of Securityholders of
other series.
RESERVE FUND. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Trust Depositor will establish for a series or class of
Securities an account, as specified in such Prospectus Supplement (the
"Reserve Fund"), which will be maintained with the related Trustee or
Indenture Trustee, as applicable. Unless otherwise provided in the related
Prospectus Supplement, the Reserve Fund will be funded by an initial deposit
by the Trust Depositor on the Closing Date in the amount set forth in such
Prospectus Supplement and, if the related series has a Funding Period, will
also be further funded on each Subsequent Transfer Date to the extent
described in such Prospectus Supplement. As further described in the related
Prospectus Supplement, the amount on deposit in the Reserve Fund will be
increased on each Distribution Date thereafter up to the Specified Reserve
Fund Balance (as defined in such Prospectus Supplement) by the deposit
therein of the amount of collections on the related Contracts remaining on
each such Distribution Date after the payment of all other required payments
and distributions on such date. The related Prospectus Supplement will
describe the circumstances and the manner under which distributions may be
made out of the Reserve Fund, either to holders of the Securities covered
thereby or to the Trust Depositor or to any other entity.
NET DEPOSITS
If so specified in the related Prospectus Supplement as an administrative
convenience, unless the Servicer is required to remit collections daily (see
"--Collections" above), the Servicer will be permitted to make the deposit of
collections, aggregate Advances and Purchase Amounts for any Trust for or
with respect to the related Due Period net of distributions to be made to the
Servicer for such Trust with respect to such Due Period. The Servicer,
however, will account to the Applicable Trustee, the Noteholders, if any, and
the Certificateholders with respect to each Trust as if all deposits,
distributions and transfers were made individually. With respect to any Trust
that issues both Certificates and Notes, if the related Distribution Dates do
not coincide with Distribution Dates, all distributions, deposits or other
remittances made on a Distribution Date will be treated as having been
distributed, deposited or remitted on the Distribution Date for
the applicable Due Period for purposes of determining other amounts required
to be distributed, deposited or otherwise remitted on such Distribution Date.
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STATEMENTS TO THE APPLICABLE TRUSTEE
Prior to each Distribution Date with respect to each series of Securities,
the Servicer will provide to the applicable Indenture Trustee, if any, and the
applicable Trustee as of the close of business on the last day of the preceding
Due Period a statement setting forth substantially the same information as
is required to be provided in the periodic reports provided to Securityholders
of such series described under "Certain Information Regarding the Securities --
Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of independent public accountants will furnish annually to
the related Trust and Applicable Trustee a statement to the effect that
such firm has audited the financial statements of Eaglemark Financial and issued
its report thereon and that such audit: (i) included an examination of selected
documents and records relating to the servicing of Contracts, (ii)
included an examination of delinquency and loss statistics relating to
Eaglemark's portfolio of Contracts and (iii) except as described in the
statement, disclosed no exceptions or errors in the records relating to the
Contracts serviced.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and the Applicable Trustee,
substantially simultaneously with the delivery of such accountants' statement
referred to above, of a certificate signed by an officer of the Servicer stating
that the Servicer has fulfilled its obligations under the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, throughout the
preceding twelve months (or, in the case of the first such certificate, from the
applicable Closing Date) or, if there has been a default in the fulfillment of
any such obligation, describing each such default. The Servicer has agreed to
give each Applicable Trustee notice of certain Servicer Defaults under the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer will exercise that degree of skill and care consistent
with the skill and care that the Servicer exercises with respect to similar
contracts serviced by the Servicer, and, in any event no less degree of skill
and care than would be exercised by a prudent servicer of motorcycle conditional
sales contracts. The Servicer is under no obligation to appear in,
prosecute or defend any legal action that is not incidental to the Servicer's
servicing responsibilities under such Sale and Servicing Agreement or Pooling
and Servicing Agreement and that, in its opinion, may cause it to incur any
expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a party, or any entity succeeding to the business of
the Servicer or, with respect to its obligations as Servicer, any corporation
50% or more of the voting stock of which is owned, directly or indirectly, by
the Company, which corporation or other entity in each of the foregoing cases
assumes the obligations of the Servicer, will be the successor of the Servicer
under such Sale and Servicing Agreement or Pooling and Servicing Agreement.
Under each Sale and Servicing Agreement and Pooling and Servicing Agreement,
the Servicer may appoint a subservicer to perform all or any portion of its
obligations as Servicer; however, in the event that the
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Servicer does appoint any such subservicer, the Servicer will remain
obligated and liable to the related Applicable Trustee and Securityholders
for servicing and administering the Contracts and will also be responsible
for any fees and expenses of the subservicer.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement, "Servicer
Default" under each Sale and Servicing Agreement and Pooling and Servicing
Agreement will include: (i) any failure by the Servicer to make any
payment or deposit required to be made under the Sale and Servicing Agreement or
Pooling and Servicing Agreement or Transfer and Sale Agreement, which failure
continues to be unremedied for four business days after the date on
which such payment or deposit was due; (ii) any failure by the Servicer duly to
observe or perform in any material respect any other covenant or agreement in
such Sale and Servicing Agreement or Pooling and Servicing Agreement or Transfer
and Sale Agreement, which failure materially and adversely affects the rights of
the Noteholders or the Certificateholders of the related series and which
continues unremedied for 30 days after the date on which such failure
commences; and (iii) the occurrence of an Insolvency Event with respect to the
Servicer. "Insolvency Event" means, with respect to any person, any of the
following events or actions: certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such person and certain actions by such person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of Owner Trusts that issue Notes, unless otherwise provided in
the related Prospectus Supplement, as long as a Servicer Default under a Sale
and Servicing Agreement and Pooling and Servicing Agreement remains unremedied,
(i) the related Indenture Trustee or (ii) the holders of Notes of the related
series evidencing not less than 51% of the principal amount of the
Notes then outstanding and Certificateholders with aggregate fractional
interests representing 51% of the Trust may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement and Pooling
and Servicing Agreement, whereupon such Indenture Trustee or a successor
servicer appointed by such Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under such Sale and
Servicing Agreement and Pooling and Servicing Agreement and will be entitled to
similar compensation arrangements. In the case of any Grantor Trust or any
Owner Trust that does not issue Notes, unless otherwise provided in the related
Prospectus Supplement, as long as a Servicer Default under the related Pooling
and Servicing Agreement remains unremedied, the related Trustee or holders of
Certificates of the related series evidencing not less than 25% of the principal
amount of such Certificates then outstanding may terminate all the rights and
obligations of the Servicer under such Pooling and Servicing Agreement,
whereupon such Trustee or a successor servicer appointed by such Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under such Pooling and Servicing Agreement and will be entitled to similar
compensation arrangements. If, however, a bankruptcy trustee or similar official
has been appointed for the Servicer, and no Servicer Default other than such
appointment has occurred, such trustee or official may have the power to prevent
any such Indenture Trustee, Noteholders, Trustee or Certificateholders from
effecting a transfer of servicing. In the event that such Indenture Trustee or
Trustee is unwilling or unable to so act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a successor with a net worth of
at least $100,000,000 (or such other amount as is specified in the related
Prospectus Supplement) and whose regular business includes the servicing of
motor vehicle contracts. Such Indenture Trustee or Trustee may make such
arrangements for compensation to be paid, which in no event may be greater than
the servicing compensation to the Servicer under such Sale and Servicing
Agreement or Pooling and Servicing Agreement.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Sale and Servicing Agreement and Pooling and Servicing Agreement may be amended
by the parties thereto, without the consent of the related Noteholders or
Certificateholders, for the purpose of adding any provisions to or changing in
any
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manner or eliminating any of the provisions of such Sale and Servicing
Agreement and Pooling and Servicing Agreement or of modifying in any manner the
rights of such Noteholders or Certificateholders; provided that such action will
not, in the opinion of counsel satisfactory to the related Trustee or Indenture
Trustee, as applicable, materially and adversely affect the interest of any such
Noteholder or Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, the Sale
and Servicing Agreement and Pooling and Servicing Agreement may also be amended
by the Trust Depositor, the Servicer, the related Trustee and any related
Indenture Trustee with the consent of the holders of Notes evidencing at least a
majority in principal amount of then outstanding Notes, if any, of the related
series and the holders of the Certificates of such series evidencing at least a
majority of the principal amount of such Certificates then outstanding, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such Sale and Servicing Agreement and Pooling and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Contracts or distributions that are
required to be made for the benefit of such Noteholders or Certificateholders or
(ii) reduce the aforesaid percentage of the Notes or Certificates of such series
which are required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes or Certificates, as the case may be, of
such series.
Each of the Sale and Servicing Agreement and Pooling and Servicing Agreement
may be amended by the parties thereto at the direction of the Company or
Servicer without the consent of any of the Securityholders to add, modify or
eliminate such provisions as may be necessary or advisable in order to enable
all or a portion of a Trust to qualify as, and to permit an election to be made
to cause all or a portion of a Trust to be treated as, a "financial asset
securitization investment trust" as described in the provisions of the "Small
Business Job Protection Act of 1996," H.R. 3448, and in connection with any such
election, to modify or eliminate existing provisions of a Sale and Servicing
Agreement or Pooling and Servicing Agreement relating to the intended federal
income tax treatment of the Securities and the related Trust in the absence of
the election. See "Federal Income Tax Consequences--Tax Treatment of a FASIT."
It is a condition to any such amendment that each Rating Agency will have
notified the Company, the Servicer and the Applicable Trustee in writing that
the amendment will not result in a reduction or withdrawal of the rating of any
outstanding Securities with respect to which it is a Rating Agency and that the
Company obtain a legal opinion from nationally recognized counsel that there are
no adverse tax consequences for the Securityholders.
Additionally, each of the Sale and Servicing Agreement and Pooling and
Servicing Agreement may be amended by the parties thereto at the direction of
the Seller or Servicer without the consent of any of the Securityholders to add,
modify or eliminate such provisions as may be necessary or advisable in order to
enable (a) the transfer to the Trust of all or any portion of the Contracts to
be derecognized under generally accepted accounting principles ("GAAP") by the
Seller to the applicable Trust, (b) the applicable Trust to avoid becoming a
member of the Seller's consolidated group under GAAP, or (c) the Seller or any
of its affiliates to otherwise comply with or obtain more favorable treatment
under any law or regulation or any accounting rule or principle; provided,
however, that it is a condition to any such amendment that (x) the Seller
delivers an officer's certificate to the related Trustee to the effect that such
amendment meets the requirements set forth in this paragraph (y) such amendment
will not result in a withdrawal or reduction of the rating of any outstanding
series of Securities under the related Trust and (z) a legal opinion is obtained
from nationally recognized counsel that such modification is in conformity with
either the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable.
INSOLVENCY EVENT
In the event that the Trust Depositor becomes bankrupt, insolvent,
withdraws or is removed from the Trust or is terminated or dissolved, the Trust
will be terminated 90 days after the date of such event and shall
thereafter effect redemption of the Notes, if any, and prepayment of the
Certificates following the winding up of the affairs of the Trust.
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Promptly after the occurrence of an Insolvency Event with respect to the
Trust Depositor, notice thereof is required to be given to the related
Securityholders; provided that any failure to give such required notice will
not prevent or delay termination of such Trust. Upon termination of any
Trust, the related Trustee shall, or shall direct the related Indenture
Trustee to, promptly sell the assets of such Trust (other than the Trust
Accounts and the Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from any
such sale, disposition or liquidation of the Contracts of such Trust will be
treated as collections on such Contracts and deposited in the related
Collection Account. With respect to any Trust, if the proceeds from the
liquidation of the related Contracts and any amounts on deposit in the
Reserve Fund (if any), the Note Distribution Account (if any) and the
Certificate Distribution Account are not sufficient to pay in full the Notes,
if any, and the Certificates of the related series, the amount of principal
returned to Noteholders and Certificateholders thereof will be reduced and
some or all of such Noteholders and Certificateholders will incur a loss.
Each Trust Agreement will provide that the applicable Trustee does not have
the power to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without the unanimous prior approval of all Certificateholders
(including the Trust Depositor) of such Trust and the delivery to such Trustee
by each such Certificateholder (including the Trust Depositor) of a certificate
certifying that such Certificateholder reasonably believes that such Trust is
insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, except as otherwise provided therein.
TRUST DEPOSITOR LIABILITY
In the case of each Owner Trust that issues Notes, under each Trust
Agreement, the Trust Depositor will agree to be liable directly to an injured
party for the entire amount of any losses, claims, damages or liabilities (other
than those incurred by a Noteholder or a Certificateholder in the capacity of an
investor with respect to such Owner Trust) arising out of or based on the
arrangement created by such Trust Agreement as though such arrangement created a
partnership under the Delaware Revised Uniform Limited Partnership Act in which
the Trust Depositor was a general partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Trust
Depositor, the related Trustee and the related Indenture Trustee, if any,
pursuant to the Sale and Servicing Agreements and Pooling and Servicing
Agreements will terminate upon the earliest to occur of (i) the maturity or
other liquidation of the last related Contract and the disposition of any
amounts received upon liquidation of any such remaining Contracts, (ii) the
payment to Noteholders, if any, and Certificateholders of the related series
of all amounts required to be paid to them pursuant to the Sale and Servicing
Agreements and Pooling and Servicing Agreements; or (iii) an insolvency event
with respect to the Trust Depositor provided, however, in no event shall the
Trust continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the
United States to the Court of St. James, living on the Closing Date specified
in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, in order
to avoid excessive administrative expense, the Seller through the Trust
Depositor will be permitted at its option to purchase from each Trust, as of
the end of any applicable Due Period, if the then outstanding Pool
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Balance with respect to the Contracts held by such Trust is 10% or less of
the Initial Pool Balance (as defined in such Prospectus Supplement, the
"Initial Pool Balance"), all remaining related Contracts at a price equal to
the aggregate of the Purchase Amounts thereof as of the end of such Due
Period.
As and to the extent in the related Prospectus Supplement, outstanding
Notes (or any class of Notes) of the related series may be redeemed
concurrently with the event specified above, and the subsequent distribution
to the related Securityholders of all amounts required to be distributed
to them pursuant to the applicable Trust Agreement or Indenture will effect
early retirement of the Securities of such series.
ADMINISTRATION AGREEMENT
The Company, in its capacity as administrator (in such capacity, the
"Administrator"), will enter into an agreement (an "Administration
Agreement") with each Owner Trust that issues Notes and the related Indenture
Trustee pursuant to which the Administrator will agree, to the extent
provided in such Administration Agreement, to provide the notices and to
perform other administrative obligations required by the related Indenture.
As compensation for the performance of the Administrator's obligations under
the applicable Administration Agreement and as reimbursement for its expenses
related thereto, the Administrator will be entitled to a monthly
administration fee (the "Administration Fee"), which fee will be paid by the
Trust Depositor.
INDIVIDUAL MOTORCYCLE INSURANCE
The terms of each Contract require that for the life of the Contract, each
Motorcycle is to be covered by a collision and comprehensive or equivalent
insurance policy which covers physical damage risks, provides limited insurance
coverage for damage to the Motorcycle, and names the Seller as a loss payee. The
amount of insurance coverage is limited to the value of the Motorcycle. In the
related Transfer and Sale Agreement, the Seller will warrant that all premium
payments on such insurance have been paid in full for one year from the date of
the Contracts' origination. Pursuant to the Contract terms, the Servicer may
"force place" (i.e., purchase on its own, with a corresponding claim for
reimbursement against the Obligor to the extent provided in the applicable
Contract) collision and comprehensive insurance with respect to the related
Motorcycle in those situations in which the Obligor has not maintained the
required insurance. Currently, the Servicer utilizes Recreational Products
Insurance Division, a division of Universal Underwriters Insurance Company, to
"force place" comprehensive and collision insurance in 31 states in which
Obligors reside. As conveyee and assignee of the Contracts, the Trust will be
entitled to the benefits of such insurance. Following repossession of a
Motorcycle by the Servicer, the Servicer does not maintain such insurance. In
the event the Servicer repossesses a Motorcycle on behalf of the Trust, the
Servicer will act as self-insurer for any damage to such motorcycle until it is
resold.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
SECURITY INTEREST IN MOTORCYCLES
The Contracts in general evidence the credit sale of new and used
motorcycles by Dealers to Obligors and also constitute personal property
security agreements granting the holder of such Contract a security interest
in the Motorcycles under the applicable UCC. Perfection of security interests
in the Motorcycles is generally governed by the motor vehicle registration
laws of the state in which a Motorcycle is located. In almost all states in
which the Contracts have been originated, a security interest in motorcycles,
automobiles, light duty trucks, vans and minivans is perfected by notation of
the secured party's lien on the vehicle's certificate of title.
All of the Contracts purchased by the Company name the Company as obligee
(by assignment or otherwise) and as the secured party. The Company also takes
all actions necessary under the laws of the
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state in which the Motorcycle is located to perfect the Company's security
interest in the Motorcycle, including, where applicable, having a notation of
its lien recorded on such vehicle's certificate of title.
The Company will sell its interests in Contracts and assign its security
interests in the Motorcycles securing the Contracts to a Trust Depositor
pursuant to a Transfer and Sale Agreement, which Trust Depositor will, in turn,
sell such interests and assign such security interests to the Trust pursuant to
either a Sale and Servicing Agreements or a Pooling and Servicing Agreement.
However, because of the administrative burden and expense, the certificates of
title to the Motorcycles will not be amended to reflect any Trust Depositor or
the Trust as the new secured party on the certificate of title relating to the
Motorcycles. Each Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, provides that the Servicer, as custodian, will hold
any certificates of title and the documents and other items relating to the
Motorcycles in its possession on behalf of the Trust and the Indenture Trustee.
With respect to certain limitations on the enforceability of the Applicable
Trustees' security interest, see "Risk Factors -- Security Interests and Other
Aspects of the Contracts".
Under the laws of most states, the perfected security interest in a
Motorcycle would continue for four months after such vehicle is moved to a state
other than the state in which it is initially registered, and thereafter until
the owner of the Motorcycle re-registers it in the new state. A majority of
states generally require surrender of a certificate of title in connection with
the re-registration of a vehicle; accordingly, a secured party must surrender
possession if it holds the certificate of title to the vehicle, or, in the case
of a vehicle registered in a state providing for the notation of a lien on the
certificate of title but not possession by the secured party, assuming no fraud
or negligence, the secured party noted on the certificate of title would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In states that do
not require a certificate of title for registration of a motor vehicle, a
re-registration could defeat perfection. In the ordinary course of servicing
Contracts, the Company takes steps to effect re-perfection upon receipt of
notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a Motorcycle, the Company must surrender
possession of the certificate of title or will receive notice as a result of its
lien noted thereon and, accordingly, will have an opportunity to require
satisfaction of the related Contract before release of the lien. Under each Sale
and Servicing Agreement or Pooling and Servicing Agreement, as applicable, the
Company as Servicer is obligated to take appropriate steps, at its own expense,
to maintain perfection of security interests in such Motorcycle and is obligated
to repurchase the related Contract if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle, liens for unpaid storage fees and liens for unpaid taxes take priority
over even a perfected security interest in a Motorcycle. The Company will
represent that, as of the date of issuance of the Securities, each security
interest in a Motorcycle is prior to all other present liens upon and security
interests in such Motorcycle. However, liens for repairs, unpaid storage fees or
taxes could arise at any time during the term of a Contract. No notice will be
given to the Applicable Trustee or the Securityholders in the event such a lien
arises nor will the Company be obligated to repurchase the related Contract if
such a lien arises after the Closing Date.
REPOSSESSION
In the event of default by a Motorcycle purchaser, a holder of a
retail installment sale contract or installment loan has all the remedies of a
secured party under the UCC, except where specifically limited by other state
laws. Among its UCC remedies, the secured party has the right to perform
self-help repossession unless such act would constitute a breach of the peace.
Self-help is the method employed by the Company in most cases and is
accomplished simply by retaking possession of the Motorcycle. In the event of
default by the Obligor, some jurisdictions require that the Obligor be notified
of the default and be given a time period within which he or she may cure the
default prior to repossession. Generally, the right to cure a default may be
exercised on a limited number of occasions in any one-year period. In cases
where the Obligor objects or raises a defense to repossession, if a Motorcycle
cannot be retaken without a breach of the peace,
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or if otherwise required by applicable state law, a court order must be
obtained from an appropriate court, and the Motorcycle must then be
repossessed in accordance with that order.
NOTICE OF SALES; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
Obligor with reasonable notice of the date, time and place of any public sale
or the date after which any private sale or other intended disposition of the
collateral may be held. All aspects of the disposition of the collateral,
including the method, manner, time, place and terms must be commercially
reasonable. The Obligor has the right to redeem the collateral prior to
actual sale by paying the secured party the unpaid principal balance of the
obligation plus reasonable expenses for repossessing, holding, and preparing
the collateral for disposition and arranging for its sale plus, in some
jurisdictions, reasonable attorneys' fees. In some states the Obligor may
have a post-repossession right to reinstate the terms of the contract or loan
and redeem the collateral by the payment of delinquent installments and
expenses incurred by the secured party in repossessing the collateral.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds obtained upon repossession and resale of the Motorcycles
generally will be applied first to the expenses of resale and repossession and
then to the satisfaction of the indebtedness. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale do not cover the full amount of the indebtedness, a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments,
provided that certain procedures are followed. However, the deficiency judgment
would be a personal judgment against the Obligor for the shortfall, and a
defaulting Obligor can be expected to have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount.
Occasionally, after resale of collateral and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
secured party to remit the surplus to any holder of a lien with respect to the
collateral or, if no such lienholder exists or there are remaining funds, the
UCC requires the secured party to remit the surplus to the former owner of the
collateral. Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws, may limit or delay the ability of a lender to
repossess and resell collateral or enforce a deficiency judgment.
CONSUMER PROTECTION LAWS
Courts have applied general equitable principles to limit and restrict
secured parties pursuing repossession or litigation involving deficiency
balances. These equitable principles may have the effect of relieving an Obligor
from some or all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protection provided under the 14th Amendment of the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance, including requirements regarding the adequate disclosure of loan terms
(including finance charges and deemed finance charges) and limitations on loan
terms (including the permitted finance charge or deemed finance charge),
collection practices and creditor remedies. The application of these laws to
particular circumstances is not always certain and some courts and regulatory
authorities have shown a willingness to adopt novel interpretations of such
laws. These laws include the Truth in Lending Act, the Equal Credit Opportunity
Act, the Federal Trade Commission Act, the Fair Credit Reporting Act, the Fair
Credit Billing Act, the Fair Debt Collection Procedures Act, the Moss-Magnuson
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Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldiers' and
Sailors' Civil Relief Act, state adaptations of the Uniform Consumer Credit Code
and state motor vehicle retail installment sales acts, retail installment sales
acts, and other similar laws. State laws generally impose finance charge
ceilings and other restrictions on consumer transactions and often require
contract disclosure in addition to those required under federal law. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions. In some cases, this liability could affect an
assignee's ability to enforce consumer finance contracts or loans such as the
Contracts.
Under the laws of certain states, finance charges with respect to motor
vehicle retail installment contracts may include the additional amount, if any,
that a purchaser pays as part of the purchase price for a motorcycle solely
because the purchaser is buying on credit rather than for cash (a "cash sale
differential"). If a Dealer charges such a cash sale differential, applicable
finance charge ceilings could be exceeded.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code and other state laws, has the effect of subjecting
an assignee of a seller of goods (and certain related creditors) to all claims
and defenses that the obligor in the transaction could assert against the seller
of the goods.
All of the Contracts will be subject to the requirements of the FTC Rule.
Accordingly, the Trust, as holder of the Contracts, will be subject to any
claims or defenses that the purchaser of the related Motorcycle may assert
against the Dealer. Such claims are limited to a maximum liability equal to
the amounts actually paid by the Obligor on the Contract. If an Obligor were
successful in asserting any such claim or defense, such claim or defense
would constitute a breach of the Company's representations and warranties
under the related Transfer and Sale Agreement and would create an obligation
of the Company to repurchase the related Contract unless the breach were
cured. The Trust Depositor will assign its rights under the related Transfer
and Sale Agreement, including its right to cause the Company to repurchase
Contracts with respect to which it is in breach of its representations and
warranties, to the Trust pursuant to either the related Sale and Servicing
Agreement or Pooling and Servicing Agreement. See "Description of the Sale
and Servicing Agreements and Pooling and Servicing Agreements -- Sale and
Assignment of Contracts".
Under most state vehicle dealer licensing laws, dealers of motorcycles are
required to be licensed to sell motorcycles at retail sale. In addition, with
respect to used motorcycles, the Federal Trade Commission's Rule on Sale of Used
Motorcycles requires that all dealers of used motorcycles prepare, complete and
display a "Buyer's Guide" which explains the warranty coverage for such
motorcycles. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act and the motor vehicle title laws
of most states require that all dealers of used motorcycles furnish a written
statement signed by the dealer certifying the accuracy of the odometer reading.
If a Dealer is not properly licensed or if either a Buyer's Guide or Odometer
Disclosure Statement was not provided to the purchaser of a Motorcycle, the
Obligor may be able to assert a defense against the Dealer. If an Obligor on a
Contract were successful in asserting any such claim or defense, the Servicer
would pursue on behalf of the Trust any reasonable remedies against the Dealer
or the manufacturer of the Motorcycle, subject to certain limitations as to the
expense of any such action to be specified in the Sale and Servicing Agreement
and Pooling and Servicing Agreement.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy code, a court may prevent a
secured party from repossessing a Motorcycle and, as part of the rehabilitation
plan, may reduce the amount of the secured indebtedness to the market value of
the Motorcycle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court
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may also reduce the monthly payments due under a Contract or change the rate
of interest and time of repayment of the indebtedness.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the material United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes and the Certificates. This discussion is based upon current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder, current administrative rulings, judicial
decisions and other applicable authorities in effect as of the date hereof, all
of which are subject to change, possibly with retroactive effect. There are no
cases or Internal Revenue Service ("IRS") rulings on similar transactions
involving a trust and instruments issued by that trust with terms similar to
those of the Trust, and the Notes and the Certificates. As a result, there can
be no assurance that the IRS will not challenge the conclusions set forth in the
following summary, and no ruling from the IRS has been or will be sought on any
of the issues discussed below. Furthermore, legislative, judicial or
administrative changes may occur, perhaps with retroactive effect, which could
affect the accuracy of the statements and conclusions set forth herein as well
as the tax consequences to holders of the Notes and the Certificates.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to all holders of Notes and Certificates in light
of their personal investment or tax circumstances nor to certain types of
holders who may be subject to special treatment under the federal income tax
laws (including, without limitation, financial institutions, broker-dealers,
insurance companies, foreign persons, tax-exempt organizations and persons who
hold the Notes or Certificates as part of a straddle, hedging or conversion
transaction). This information is generally directed to prospective purchasers
who purchase Notes or Certificates at the time of original issue, who are
citizens or residents of the United States, and who hold the Notes or
Certificates as "capital assets" within the meaning of Section 1221 of the Code.
Taxpayers and preparers of tax returns (including those filed by any partnership
or other issuer) should be aware that under applicable Treasury Regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should consult
their own tax advisors and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax treatment has been
discussed herein. PROSPECTIVE INVESTORS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER
TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES
AND CERTIFICATES.
Each Trust will be provided with an opinion of Winston & Strawn special
federal income tax counsel to each Trust, as specified in the related
Prospectus Supplement ("Federal Tax Counsel"), regarding certain federal
income tax matters discussed below. An opinion of Federal Tax Counsel,
however, is not binding on the IRS or the courts. Such opinions will be filed
by the Servicer, together with the final documentation for the respective
Trust transactions, with the Commission under Form 8-K under the Exchange
Act. For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the
Notes, Certificates and related terms, parties and documents applicable to
such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is an Owner Trust, treated as a partnership
under the Code or a Grantor Trust treated as a grantor trust under the Code.
Pursuant to legislation enacted in 1996, as an alternative to those two
types of trusts, effective September 1, 1997 the Trust could elect to be
treated as a financial asset securitization investment trust ("FASIT"). A
summary of the federal income tax consequences pertaining to each type of
trust is set forth below. The Prospectus Supplement for each series of
Securities will specify the treatment of the Trust for federal income tax
purposes. To the extent any given series of Notes or Certificates differs
from the
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assumptions or conditions set forth in the following discussion, any
additional tax considerations will be disclosed in the applicable Prospectus
Supplement.
OWNER TRUSTS
TAX CHARACTERIZATION OF OWNER TRUSTS
OPINIONS
Federal Tax Counsel will deliver its opinion that a Trust characterized as
an Owner Trust will not be an association (or a publicly traded partnership)
taxable as a corporation for federal income tax purposes. This opinion will be
based on the assumptions that the terms of the Trust Agreement and related
documents will be complied with and that the Certificateholders will take all
action necessary, if any, or refrain from taking any inconsistent action so as
to ensure the Trust is a partnership under the Check the Box regulations
(defined below) and on Federal Tax Counsel's conclusions that (i) the Trust will
constitute a business entity and will have two or more members, (ii) the nature
of the income of the Trust will exempt it from the rule that certain publicly
traded partnerships are taxable as corporations, and (iii) the Trust, if a
corporation, would not constitute a regulated investment company under Code
Section 851.
If the Trust were taxable as a corporation for federal income tax purposes,
it would be subject to corporate income tax on its taxable income. The Trust's
taxable income would include all its income on the related Contracts and other
assets, which may be reduced by its interest expense on the Notes if the Notes
are respected as debt of such corporation. Any such corporate income tax could
materially reduce cash available to make payments on the Notes and distributions
on the Certificates, and Certificateholders could be liable for any such tax
that is unpaid by the Trust.
Federal Tax Counsel will also render an opinion that the Notes will be
classified as debt for federal income tax purposes.
TAX CONSEQUENCES TO HOLDERS OF NOTES ISSUED BY AN OWNER TRUST
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Trust Depositor and the
Certificateholders will agree, and the Noteholders will agree by their
purchase of Notes, to treat the Notes as debt for federal income tax
purposes. Additionally, Federal Tax Counsel will render an opinion that the
Notes will be classified as debt for federal income tax purposes. The
discussion below assumes that characterization of the Notes is correct.
OID. The discussion below assumes that all payments on the Notes are
denominated in U.S. dollars. Moreover, the discussion assumes that the interest
formula for the Notes meets the requirements for "qualified stated interest"
under Treasury regulations relating to original issue discount ("OID"), and that
any OID on the Notes (i.e., any excess of the stated redemption price at
maturity of the Notes over their issue price) does not exceed a DE MINIMIS
amount (i.e., 1/4% of their stated redemption price at maturity multiplied by
the number of full years included in their term), all within the meaning of such
OID regulations.
If the interest formula for the Notes does not meet the requirements for
"qualified stated interest" because it may not satisfy the "unconditionally
payable" test of the OID regulations or the Notes otherwise have more than a
DE MINIMIS amount of OID, the Notes will have OID and a Noteholder will be
required to include such OID in income as it accrues under a constant yield
method in advance of receipt of cash payments, regardless of the Noteholder's
regular method of tax accounting. In general, the amount of OID included in
income is the sum of the "daily portions" of the OID with respect to the Note
for each day during the taxable year the Noteholder held the Note. The daily
portion generally is determined by allocating to each day in an accrual
period a ratable portion of the OID allocable to such accrual period. The
amount of OID allocable to an accrual period is generally equal to the
difference between (i) the product of the Note's adjusted issue price and its
yield to maturity and (ii) the amount of qualified stated interest payments
allocable to such accrual period. The "adjusted issue price" of an OID Note
at the beginning of any accrual period is the sum of its issue
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price plus the amount of OID allocable to prior accrual periods minus the
amount of prior payments that were not qualified stated interest.
Alternatively, because the payments on the Notes may be accelerated by reason
of prepayments on the Contracts, OID, other than DE MINIMIS OID, on the
Notes, if any, may have to be accrued under Code section 1272(a)(6), which
allocates OID to each day in an accrual period by taking the ratable portion
of the excess of (i) the sum of the present value of the remaining payments
on a Note as of the close of the accrual period and the payments made during
the accrual period that were included in stated redemption price at maturity,
over (ii) the adjusted issue price of the Note at the beginning of the
accrual period. No regulations have been issued under Code section 1272(a)(6)
so it is not clear if such section would apply to the Notes if they are
treated as having OID. The Clinton Administration has proposed legislation
which if enacted, would require OID on the Notes to be computed in accordance
with Section 1272(a)(6) and certain prepayment assumptions.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, the Notes
should not be considered to be issued with OID. The stated interest thereon will
be taxable to a Noteholder as ordinary interest income when received or accrued
in accordance with such Noteholder's method of tax accounting. Under the OID
regulations, a holder of a Note issued with a DE MINIMIS amount of OID must
include such OID in income, on a pro rata basis, as principal payments are made
on the Note. A purchaser who buys a Note for more or less than its principal
amount will generally be subject, respectively, to the premium amortization or
market discount rules of the Code.
Acquisition Premium. A U.S. Holder that purchases a Note for an amount less
than or equal to the sum of all amounts payable on the Note after the purchase
date other than payments of qualified stated interest but in excess of its
adjusted issue price (any such excess being "acquisition premium") and that does
not make the election described below under "Election to Treat All Interest as
Original Issue Discount" is permitted to reduce the daily portions of OID, if
any, by a fraction, the numerator of which is the excess of the U.S. Holder's
adjusted basis in the Note immediately after its purchase over the adjusted
issue price of the Note, and the denominator of which is the excess of the sum
of all amounts payable on the Note after the purchase date, other than payments
of qualified stated interest, over the Note's adjusted issue price.
MARKET DISCOUNT. The Notes, whether or not issued with original issue
discount, will be subject to the "market discount rules" of section 1276 of the
Code. In general, these rules provide that if the holder of a Note purchases the
Note at a market discount (i.e., a discount from its original issue price plus
any accrued original issue discount that exceeds a DE MINIMIS amount specified
in the Code) and thereafter recognizes gain upon a disposition, the lesser of
(i) such gain or (ii) the accrued market discount will be taxed as ordinary
income. Generally, the accrued market discount will be the total market discount
on the Note multiplied by a fraction, the numerator of which is the number of
days the holder held the Note and the denominator of which is the number of days
from the date the holder acquired the Note until its maturity date. The holder
may elect, however, to determine accrued market discount under the
constant-yield method. Holders should consult with their own tax advisors as to
the effect of making this election.
Limitations imposed by the Code which are intended to match deductions with
the taxation of income defer deductions for interest on indebtedness incurred or
continued, or short-sale expenses incurred, to purchase or carry a Note with
accrued market discount. A Noteholder who elects to include market discount in
gross income as it accrues is exempt from this rule. The adjusted basis of a
Note subject to such election will be increased to reflect market discount
included in gross income, thereby reducing any gain or increasing any loss on a
sale or taxable disposition.
Election to Treat All Interest as Original Issue Discount. A U.S. Holder may
elect to include in gross income all interest that accrues on a Note using the
constant-yield method described above under the heading "Original Issue
Discount," with modifications described below. For purposes of this election,
interest includes stated interest, OID, DE MINIMIS OID, market discount,
DE MINIMIS market discount and unstated interest, as adjusted by any amortizable
bond premium (described below under "Amortizable Bond Premium") or acquisition
premium.
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In applying the constant-yield method to a Note with respect to which
this election has been made, the issue price of the Note will equal the
electing U.S. Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition
by the electing U.S. Holder, and no payments on the Note will be treated as
payments of qualified stated interest. This election, if made, may not be
revoked without the consent of the IRS. U.S. Holders should consult with
their own tax advisors as to the effect in their circumstances of making this
election.
AMORTIZABLE BOND PREMIUM. In general, if a Noteholder purchases a Note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), such Noteholder will be considered to have purchased such Note with
"amortizable bond premium" equal to the amount of such excess. Such Noteholder
may elect to deduct the amortizable bond premium as it accrues under a
constant-yield method over the remaining term of the Note. Under proposed
regulations, if finalized, accrued amortized bond premium may only be used as an
offset against qualified stated interest when such interest is included in the
holder's gross income under the holder's normal accounting system.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost basis for the Note, increased by any market discount, acquisition discount,
OID and gain previously included by such Noteholder in income with respect to
the Note and decreased by the amount of bond premium (if any) previously
amortized and by the amount of principal payments previously received by such
Noteholder with respect to such Note. Any such gain or loss will be capital gain
or loss if the Note was held as a capital asset, except for gain representing
accrued interest and accrued market discount not previously included in income.
Capital losses generally may be used only to offset capital gains.
Back-up Withholding. Each holder of Note (other than an exempt holder such
as a corporation, tax exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalty of perjury, a certificate containing the holder's name, address, correct
federal taxpayer identification number and a statement that the holder is not
subject to Back-up withholding. Should a nonexempt Noteholder fail to provide
the required certification, the Trust will be required to withhold 31% of the
amount otherwise payable to the holder, and remit the withheld amount to the IRS
as a credit against the holder's federal income tax liability.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-U. S. person (a "foreign
person") generally will be considered "portfolio interest," and generally will
not be subject to United States federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the foreign person and the foreign person (i) is not
actually or constructively a "10 percent shareholder" of the Trust (including a
holder of 10% of the outstanding Certificates) or a "controlled foreign
corporation" with respect to which the Trust is a "related person" within the
meaning of the Code and (ii) provides the Owner Trustee or other person who is
otherwise required to withhold U.S. tax with respect to the Notes with an
appropriate statement (on Form W-8), signed under penalties of perjury,
certifying that the beneficial owner of the Note is a foreign person and
providing the foreign person's name and address. If a Note is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement must be
accompanied by a Form W-8 or substitute form provided by the foreign person that
owns the Note. If such interest is not portfolio interest, then it will be
subject to United States federal income and withholding tax at a rate of 30
percent, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign
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person and (ii) in the case of an individual foreign person, the foreign
person is not present in the United States for 183 days or more in the
taxable year.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
resulting taxable corporation would not be able to reduce its taxable income by
deductions for interest expense on Notes recharacterized as equity).
Alternatively, it is possible that the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) could constitute "unrelated business taxable
income," income to foreign holders generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses, and income from the Trust's assets would be taxable to Noteholders
regardless if cash distributions are made from the Trust.
TAX CONSEQUENCES TO HOLDERS OF CERTIFICATES ISSUED BY AN OWNER TRUST
TREATMENT OF TRUST AS A PARTNERSHIP. The Trust Depositor and the
Servicer will agree, and the related Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in
whole or in part by income, with the assets of the partnership being the
assets held by the Trust, the partners of the partnership being the
Certificateholders, and the Notes being debt of the partnership. However, the
proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Trust Depositor and the Servicer is not certain
because there is no authority on transactions closely comparable to that
contemplated herein. The Trust, the Trust Depositor, and the
Certificateholders will take all necessary actions, if any, and refrain from
taking any inconsistent actions, so as to ensure that the Trust will be
treated as a partnership under the final Treasury Regulations which allow an
entity to elect status as a partnership (the "Check the Box" regulations).
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Depositor or the Trust. Any
such characterization should not result in materially adverse tax consequences
to Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership and that all payments on the Certificates are denominated in U.S.
dollars.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the related Contacts
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of such Contracts. The Trust's
deductions will consist primarily of interest accruing with respect to the
Notes, servicing and other fees, and losses or deductions upon collection or
disposition of Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (i.e., the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass-Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the related Contracts that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any
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amortization by the Trust of premium on Contracts that corresponds to any
excess of the issue price of Certificates over their principal amount. All
remaining taxable income of the Trust will be allocated to the Trust
Depositor. Based on the economic arrangement of the parties, this approach
for allocating Trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not
require a greater amount of income to be allocated to Certificateholders.
Moreover, even under the foregoing method of allocation, Certificateholders
may be allocated income equal to the entire Pass-Through Rate plus the other
items described above, even though the Trust might not have sufficient cash
to make current cash distributions of such amount. Thus, cash basis holders
will in effect be required to report income from the Certificates on the
accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes.
In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable
income that is greater or less than the amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
tax-exempt entity (including an individual retirement account) will constitute
"unrelated business taxable income" generally taxable to such a holder under the
Code.
With respect to any Certificateholder who is an individual, an individual
taxpayer's share of expenses of the Trust (including fees to the Servicer but
not interest expense) would be miscellaneous itemized deductions. Such
deductions might be disallowed to the individual in whole or in part and might
result in such holder being taxed on an amount of income that exceeds the amount
of cash actually distributed to such holder over the life of the Trust.
The Trust will make all tax calculations relating to income and allocations
to Certificateholders on an aggregate basis. If the IRS were to require that
such calculations be made separately for each Contract, the Trust might be
required to incur additional expense but it is believed that there would not be
a material adverse effect on Certificateholders.
DISCOUNT AND PREMIUM. It is believed that the Contracts will not be issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the related Contracts may be greater or
less than the remaining principal balance of the Contracts at the time of
purchase. If so, the Contracts will have been acquired at a premium or discount,
as the case may be. As indicated above, the Trust will make this calculation on
an aggregate basis, but might be required to recompute it on a
Contract-by-Contract basis.
If the Trust acquires the Contracts at a market discount or premium, it will
elect to include any such discount in income currently as it accrues over the
life of such Contracts or to offset any such premium against interest income on
such Contracts. As indicated above, a portion of such market discount income or
premium deduction may be allocated to Certificateholders.
DISTRIBUTIONS TO CERTIFICATEHOLDERS. Certificateholders generally will not
recognize gain or loss with respect to distributions from the Trust. A
Certificateholder will recognize gain, however, to the extent that any money
distributed exceeds the Certificateholder's adjusted basis in the Certificates
(as described below "Disposition of Certificates") immediately before the
distribution. A Certificateholder will recognize loss upon the termination of
the Trust or termination of the Certificateholder's interest in the Trust if the
Trust only distributes money to the Certificateholder and the amount distributed
is less than the Certificateholder's adjusted basis in the Certificates. Any
gain or loss will generally be long-term gain or loss if the holding period of
the Certificate is more than one year.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. Under current regulations, if such a termination occurs, the
Trust will be considered to distribute its assets to the partners, who would
then be treated as recontributing those assets
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to the Trust, as a new partnership. Such deemed distribution may cause the
realization of income depending on the Certificateholder's basis in its
Certificate. In addition, the holding period of the Certificate will start
anew. Under proposed regulations, which will be effective for terminations on
or after the date the final regulations are published in the Federal
Register, the partnership on a termination will be treated as transferring
all its assets and liabilities to a new partnership in exchange for an
interest in the new partnership and immediately thereafter the terminated
partnership will be treated as distributing the new partnership interest to
the partners in liquidation of the terminated partnership. Such termination
under the new regulations should not cause income to be realized. The Trust
may not comply with certain technical requirements that might apply
when such a constructive termination occurs. As a result, the Trust may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the Trust might not
be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the Trust Depositor's tax basis in the
Certificates sold. A Certificateholder's tax basis in a Certificate will
generally equal the holder's cost increased by the holder's share of Trust
income (that was includible in the Certificateholder's income) and decreased by
any distributions received with respect to such Certificate. In addition, both
the tax basis in the Certificates and the amount realized on a sale of a
Certificate would include the holder's share of the Notes and other liabilities
of the Trust. A holder acquiring Certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in such Certificates,
and, upon sale or other disposition of some of the Certificates, allocate a
portion of such aggregate tax basis to the Certificates sold (rather than
maintaining a separate tax basis in each Certificate for purposes of computing
gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the related Contracts would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Trust
Depositor will be authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
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ADMINISTRATIVE MATTERS. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (a) the name, address and identification number of such person, (b)
whether such person is a United States person, a tax-exempt entity, a foreign
government or an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (c) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Trust Depositor will be designated as the tax matters partner for the
Trust in the Trust Agreement and, as such, will be responsible for representing
the Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Back-up Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "Back-up" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Nevertheless, the Trust will
withhold as if it were so engaged in order to protect the Trust from possible
adverse consequences of a failure to withhold. The Trust expects to withhold on
the portion of its taxable income that is allocable to foreign
Certificateholders pursuant to Section 1446 of the Code, as if such income were
effectively connected to a U.S. trade or business, at a rate of 35% for foreign
holders that are taxable as corporations and 39.6% for all other foreign
holders. Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the Trust to change its withholding
procedures. In determining a holder's withholding status, the Trust may
generally rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return (including, in the case of a corporation, the branch profits
tax) on its share of the Trust's income. Each foreign
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holder must obtain a taxpayer identification number from the IRS and submit
that number to the Trust on Form W-8 in order to assure appropriate crediting
of the taxes withheld. A foreign holder generally would be entitled to file
with the IRS a claim for refund with respect to taxes withheld by the Trust,
taking the position that no taxes were due because the Trust was not engaged
in a U.S. trade or business (although no assurance can be given as to the
prospects for success of the refund claim). However, even if such a position
is successful, interest payments made (or accrued) to a Certificateholder who
is a foreign person may be considered to be guaranteed payments, but only to
the extent such payments are determined without regard to the income of the
Trust. It is unclear whether the IRS would agree with that characterization.
If these interest payments are properly characterized as guaranteed payments,
then the interest will not constitute "portfolio interest." As a result,
Certificateholders will be subject to 30 percent U.S. withholding tax, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a
foreign holder would only be entitled to claim a refund for that portion of
the taxes in excess of the taxes that should be withheld with respect to the
guaranteed payments.
GRANTOR TRUSTS
TAX CHARACTERIZATION OF GRANTOR TRUSTS
OPINION
Federal Tax Counsel will deliver its opinion that a Trust characterized as a
Grantor Trust will be classified as a grantor trust and not as an association
taxable as a corporation and that, subject to the discussion below under
"Stripped Bond Treatment", each Certificateholder will be treated for federal
income tax purposes as the owner of a pro rata undivided interest in the income
and assets of the Trust.
GENERAL
For federal income tax purposes, the Trust will be deemed to have acquired
the following assets: (i) the principal portion of each Contract, plus a portion
of the interest due on each Contract (the "Trust Stripped Bonds"), (ii) the
portion of the interest due on each such Contract not allocable to the Trust
Stripped Bonds or retained by the Seller (the "Trust Stripped Coupons"), (iii)
the proceeds of certain insurance policies on the motorcycles, (iv) rights under
the Trust Deposit Agreement and (v) rights under the Security Agreement in favor
of the Trust securing the Trust Depositor's obligation to purchase Subsequent
Contracts and deliver them to the Trust. Although the Trust will have certain
rights with respect to the Reserve Fund, the Pre-Funding Account and the
Interest Reserve Account, such accounts are not assets of the Trust.
Each Certificateholder will have a taxable event when an asset of the Trust
(including any Contract) is disposed of (whether by sale, exchange, redemption
or payment at maturity) or when the Certificateholder's Certificate is redeemed
or sold. A Certificateholder must allocate the cost of its Certificates among
its allocable share of the assets of the Trust, including the Contracts (in
accordance with the proportion of the relative fair market values of such assets
as of the date such Certificateholder acquired its Certificate) in order to
determine its initial tax basis for its pro rata portion of each asset held by
the Trust, including the Contracts. For this purpose, a Certificateholder may
treat the Trust's rights in the security interests, the individual insurance
contracts on the motorcycles, and other rights the Trust may have which provide
credit enhancement as part of the Contracts such that no separate allocation of
the Certificate cost and determination of basis must be made to these rights.
Such tax basis is adjusted upward by the amount of original issue discount
("OID"), if applicable (see the discussion below under "Stripped Bond
Treatment", and downward by the amount of all payments previously received by
such Certificateholder (assuming OID treatment applies) under "Stripped Bond
Treatment" below.
The Trust Stripped Bonds will be treated as "stripped bonds" and the Trust
Stripped Coupons will be treated as "stripped coupons," both within the meaning
of Section 1286 of the Code.
INCOME OF HOLDERS OF CERTIFICATES ISSUED BY A GRANTOR TRUST
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Subject to the discussion below under "Stripped Bond Treatment", each
Certificateholder will be required to report on its federal income tax
return, in a manner consistent with its method of accounting, its pro rata
allocable share of the entire gross income of the Trust, including interest
or finance charges earned on the Contracts, and any gain or loss upon
collection or disposition of the Contracts. In computing its federal income
tax liability, a Certificateholder will be entitled to deduct, consistent
with its method of accounting, its pro rata allocable share of reasonable
fees payable to the Servicer that are paid or incurred by the Trust as
provided in Sections 162 or 212 of the Code. If a Certificateholder is an
individual, estate or trust, the deduction for its pro rata share of such
fees will be allowed only to the extent that all of its miscellaneous
itemized deductions, including its share of such fees, exceed 2% of its
adjusted gross income. In addition, Code Section 68 provides that itemized
deductions otherwise allowable for a taxable year of an individual taxpayer
whose adjusted gross income exceeds a specified amount will be reduced by the
lesser of (i) 3% of the excess, if any, of adjusted gross income over such
amount, or (ii) 80% of the amount of itemized deductions otherwise allowable
for such year. As a result, such investors holding Certificates, directly or
indirectly through a pass-through entity, may have aggregate taxable income
in excess of the aggregate amount of cash received on such Certificates with
respect to interest at the related Pass-Through Rate on such Certificates.
STRIPPED BOND TREATMENT
Although the federal income tax treatment of stripped bonds is not entirely
clear, since only limited regulations have been issued by the IRS, based on
guidance by the IRS it is believed that the Contracts should be treated as
"stripped bonds" and the interest thereon payable to the Certificateholders as
"stripped coupons." The Contracts would, therefore, be treated as subject to the
OID provisions and stripped bond provisions of the Code. Each Certificateholder
would be treated as owning stripped bonds (represented by its portion of the
Class A Percentage or Class B Percentage of principal payments on each Contract)
and stripped coupons (equal to that Certificateholder's proportionate part of
the interest on the Trust Stripped Bonds). Furthermore, each Class B
Certificateholder will own a proportionate part of the stripped coupons
represented by the Trust Stripped Coupons. Each stripped bond and coupon should
generally be treated as a single debt instrument. As a result of this
characterization, each Certificateholder will be allocated interest from the
Contracts equal to its respective share of the Class A Pass-Through Rate or the
Class B Pass-Through Rate and principal on the Contracts equal to its Class A
Percentage or Class B Percentage of such principal.
In general, under the stripped bond and OID provisions of the Code, each
initial Certificateholder would report OID (other than certain DE MINIMIS
amounts) in each taxable year computed on a constant yield method based on the
yield to maturity of the Contracts held by the Trust. Such yield would be
computed with respect to each Certificateholder by taking into account such
Certificateholder's purchase price for its interest in the Contracts and the
payments to be made in respect of the Certificateholder's interest in such
Contracts. Thus, it is believed that the effect of the stripped bond rules and
the OID provisions would be to treat each Contract as a bond originally issued
on the date it is purchased (i.e., the date that a holder purchases its
Certificate), and having OID equal to the excess of (a) the Certificateholder's
share of the sum of all payments that are part of each Contract over (b) the
portion of the Certificateholder's purchase price for the Certificate that is
properly allocable to each Contract. As a consequence, each Certificateholder,
regardless of its method of tax accounting, would be required to include in its
ordinary gross income the sum of the "daily portions" of the OID determined with
respect to such Certificateholder's pro rata interest in such Contracts for all
days during the taxable year on which the Certificateholder owns the
Certificate.
The method of calculating yield to maturity is not clear, and in particular
it is not clear under the Code whether prepayments on the underlying Contracts
should be taken into account in determining such yield. The Clinton
Administration has proposed legislation which if enacted, may require the yield
on the Contracts to be determined based on the prepayment assumptions.
Based on the preamble to certain stripped bond regulations, although the
matter is not entirely clear, the interest income on the Class A Certificates
and the Class B Certificates and the portion of the Monthly Servicing Fee
allocable to each such Certificate may be treated, in whole or in part, as
so-called "qualified stated interest." In that case, the income reportable by
the initial holder of a Certificate in each monthly accrual
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period under the OID provisions should be approximately the same as its pro
rata share of the aggregate interest accruing with respect to the Certificate
in accordance with its terms, plus the Certificate's pro rata share of the
portion of the Monthly Servicing Fee and any allocable fees and expenses.
Under the foregoing analysis, the bond premium and market discount rules of
the Code would not apply to the initial holder of a Certificate.
The OID provisions of the Code and the regulations thereunder are complex,
are unclear in many respects, and do not address many issues raised by the
Contracts. Moreover, only limited guidance has been issued with respect to
stripped bonds and final regulations under the stripped bond provisions of the
Code may provide for different treatment, perhaps with retroactive effect.
Holders of Certificates issued by a Grantor Trust should consult their tax
advisors to determine the proper method of reporting taxable income from the
Certificates.
SALE OF CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale allocable to each of the
Contracts and the Certificateholder's adjusted basis in each of the
Contracts. A Certificateholder's adjusted basis will equal the
Certificateholder's cost for the Certificate, increased by any OID previously
included in income, and decreased by the amount of payments previously
received on the Contracts, however denominated (other than qualified stated
interest payments). Any gain or loss will be capital gain or loss if the
Certificate was held as a capital asset. A capital gain or loss will be
long-term or short-term depending on whether or not the Certificates have
been owned for more than one year.
FOREIGN CERTIFICATEHOLDERS
Income attributable to Contracts which is received by a foreign
Certificateholder will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments, provided that (i) the foreign
Certificateholder does not own, directly or indirectly, 10% or more of, and is
not a controlled foreign corporation related to , the Seller and (ii) such
holder fulfills certain certification requirements. Under such requirements, the
holder must certify, under penalty of perjury, that it is not a "United States
person" and provide its name and address on Form W-8. For this purpose, "United
States person" generally means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof or an estate or
trust the income of which is includable in gross income for United States
federal income tax purposes, regardless of its source or which is subject to the
supervision or authority of a U.S. court or U.S. fiduciary. Gain realized upon
the sale of a Certificate by a foreign Certificateholder generally will not be
subject to United States withholding tax. If, however, such interest or gain is
effectively connected to the conduct of a trade or business within the United
States by such foreign Certificateholder (or in the case of gain the
Certificateholder is an individual who is present in the United States for a
total of 183 days or more during the taxable year in which such gain is
realized), such holder will be subject to United States federal income tax
thereon at either the regular rates or a special 30% withholding tax rate.
Potential investors who are not United States persons should consult their own
tax advisors regarding the specific tax consequences to them of owning a
Certificate issued by a Grantor Trust.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will furnish or make available, within the prescribed period of
time for tax reporting purposes after the end of each calendar year, to each
Certificateholder or each person holding a Certificate on behalf of a
Certificateholder at any time during such year, such information as the Trustee
deems necessary or desirable to assist Certificateholders in preparing their
federal income tax returns. Payments made on the Certificates and proceeds from
the sale of the Certificates will not be subject to a "backup" withholding tax
of 31% unless, in general, a Certificateholder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
62
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TAX TREATMENT OF A FASIT
The "Small Business Job Protection Act of 1996" (the "Act") creates a new
type of entity for federal income tax purposes called a "financial asset
securitization investment trust" or "FASIT" effective on and after September 1,
1997. The Act enables certain arrangements similar to a Trust to elect to be
treated as a FASIT. Under the FASIT provisions of the Act, a FASIT generally
would avoid federal income taxation and could issue securities substantially
similar to the Certificates and Notes, and those securities would be treated as
debt for federal income tax purposes. If so specified in the related Prospectus
Supplement, a Trust may make an election to be treated as a FASIT. The
applicable Pooling and Servicing Agreement or Sale and Servicing Agreement for
such a Trust may contain such terms and provide for the issuance of Notes or
Certificates on such terms and conditions as are permitted for a FASIT. In
addition, upon satisfying certain conditions set forth in the Pooling and
Servicing Agreements or Sale and Servicing Agreements in existence on September
1, 1997, the Seller and Servicer will be permitted to amend any such Pooling and
Servicing Agreements or Sale and Servicing Agreements so as to enable all or a
portion of a Trust to qualify as a FASIT and to permit a FASIT election to be
made with respect thereto, and to make such modifications to a Pooling and
Servicing Agreement or Sale and Servicing Agreement as may be permitted by
reason of the making of such an election. See "Description of the Pooling and
Servicing Agreements--Amendment." However, there can be no assurance that the
Seller will or will not cause any permissible FASIT election to be made with
respect to an existing Trust or amend a Pooling and Servicing Agreement or Sale
and Servicing Agreement in connection with any election. In addition, if such an
election is made, it may cause a holder to recognize gain (but not loss) with
respect to any Notes or Certificates held by it, even though Federal Tax Counsel
previously delivered its opinion that the Notes or Certificates will be treated
as debt for federal income tax purposes without regard to the election and the
Notes or Certificates would be treated as debt following the election.
Additionally, any such election and amendments to a Pooling and Servicing
Agreement or Sale and Servicing Agreement may have other tax and non-tax
consequences to Securityholders. Such consequences, together with a detailed
discussion of the tax aspects of a FASIT, will be set forth in the Prospectus
Supplement applicable thereto.
CERTAIN STATE TAX CONSEQUENCES
Because of the differences in state tax laws and their applicability to
different investors, it is not possible to summarize the potential state tax
consequences of holding the Certificates. ACCORDINGLY, PURCHASERS OF
CERTIFICATES OR NOTES SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE STATE
TAX CONSEQUENCES OF PURCHASING ANY CERTIFICATES OR NOTES. * * *
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATE OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
63
<PAGE>
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Plan"), from engaging in
certain transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Plan. A violation of
these "prohibited transaction" rules may result in an excise tax or other
penalties and liabilities under ERISA and the Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Plan that
purchased Certificates if assets of the Trust were deemed to be assets of the
Plan. Under a regulation issued by the United States Department of Labor (the
"Plan Assets Regulation"), the assets of a Trust would be treated as assets of a
Plan for the purposes of ERISA and the Code only if the Plan acquired an "equity
interest" in the Trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An equity interest is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A Plan fiduciary considering the purchase of Securities of a given series
should consult its tax and/or legal advisors regarding whether the assets of the
related Trust would be considered plan assets, the possibility of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
THE NOTES
Unless otherwise specified in the Prospectus Supplement, the Notes of each
series may be purchased by a Plan if the fiduciary of the Plan determines that
the purchase of a Note is consistent with its fiduciary duties and does not
result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
SENIOR CERTIFICATES
The following discussion applies only to nonsubordinate Certificates
(referred to herein as "Senior Certificates") issued by a Grantor Trust.
The U.S. Department of Labor has granted to the lead Underwriter named in
the Prospectus Supplement an exemption (the "Exemption") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Plans of certificates representing
interests in asset-backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The contracts covered by the Exemption include
motor vehicle retail installment sales contracts and installment loans such as
the Contracts. The Exemption should apply to the acquisition, holding and resale
in the secondary market of the Senior Certificates by a Plan, provided that
certain conditions (certain of which are described in the related Prospectus
Supplement) are met. It should be noted, however, that in issuing the Exemption
the Department may not have considered interests in pools of the exact nature of
some of the offered Certificates.
Unless otherwise specified in the Prospectus Supplement, the Company
believes that, after the expiration of any applicable Funding Period, the
Exemption will apply to the acquisition and holding by Plans of Senior
Certificates sold by the Underwriter or Underwriters named in the Prospectus
Supplement and that all conditions of the Exemption other than those within the
control of the investors will have been met.
64
<PAGE>
SUBORDINATE CERTIFICATES
Unless otherwise specified in the Prospectus Supplement, the Certificates
issued by Owner Trusts that also issue Notes and Subordinate Certificates issued
by Grantor Trusts may not be purchased by a Plan or by any entity whose
underlying assets include Plan assets by reason of a Plan's investment in the
entity. By its acceptance of such Certificate, each Certificateholder will be
deemed to have represented and warranted that it is not a Plan.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Trust Depositor will agree to cause the related Trust to sell
to the underwriters named therein and in the related Prospectus Supplement, and
each of such underwriters will severally agree to purchase, the principal amount
of each class of Notes and Certificates, as the case may be, of the related
series set forth in such underwriting agreements and in such Prospectus
Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Notes and Certificates, as the case may be, being offered thereby will
be offered to the public and any concessions that may be offered to certain
broker-dealers participating in the offering of such Notes and Certificates or
(ii) specify that the related Notes and Certificates, as the case may be, are to
be resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that the Trust Depositor will
indemnify the underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts in
Eligible Investments acquired from such underwriters or from the Trust
Depositor.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Trust Depositor, the Servicer and the
Administrator by Winston & Strawn, Chicago, Illinois, including providing an
unqualified opinion with respect to the legality of the Securities issued by
a Trust, and for the underwriters for such series by Brown & Wood LLP, New
York, New York.
65
<PAGE>
INDEX OF TERMS
Administration Agreement.......................................... 9, 45
Administration Fee................................................ 45
Administrator..................................................... 45
Advance........................................................... 8
Applicable Trustee................................................ 31
Base Rate......................................................... 27
Buell............................................................. 1, 6
Calculation Agent................................................. 28
Calculation Date.................................................. 28, 29, 31
CD Rate........................................................... 28
CD Rate Determination Date........................................ 28
CD Rate Security.................................................. 27
Certificate Balance............................................... 5
Certificate Distribution Account.................................. 37
Certificate Pool Factor........................................... 20
Certificateholder................................................. 10
Certificates...................................................... 1
Closing Date...................................................... 4
Code.............................................................. 48
Collateral Reinvestment Account................................... 1, 6
Collection Account................................................ 36
Collection Period................................................. 38
Commercial Paper Rate............................................. 28
Commercial Paper Rate Determination Date.......................... 28
Commercial Paper Rate Security.................................... 27
Commission........................................................ 2
Company........................................................... 1, 3
Composite Quotations.............................................. 27
Contracts......................................................... 1, 6, 7
Cutoff Dates...................................................... 12
Definitive Certificates........................................... 32
Definitive Notes.................................................. 32
Definitive Securities............................................. 32
Depositor......................................................... 7
Depository........................................................ 21
Distribution Date................................................. 22
DTC Participants.................................................. 31
Due Period........................................................ 38
Eaglemark......................................................... 3
Eaglemark Financial............................................... 3
66
<PAGE>
Early Amortization Event.......................................... 6
Eligible Deposit Account.......................................... 38
Eligible Investments.............................................. 37
ERISA............................................................. 10
Events of Default................................................. 23
FASIT............................................................. 49, 50
Federal Funds Rate................................................ 29
Federal Funds Rate Determination Date............................. 29
Federal Funds Rate Security....................................... 27
Federal Tax Counsel............................................... 49
Fixed Rate Securities............................................. 27
Floating Rate Securities.......................................... 27
Foreign Person.................................................... 60
FTC Rule.......................................................... 47
Funding Period.................................................... 6
H.15(519)......................................................... 27
Harley-Davidson................................................... 1
Indenture......................................................... 3
Indenture Trustee................................................. 1
Index Maturity.................................................... 27
Indirect Participants............................................. 31
Initial Contracts................................................. 6
Initial Cutoff Date............................................... 6
Initial Pool Balance.............................................. 44
Insolvency Event.................................................. 42
Interest Rate..................................................... 4
Interest Reset Date............................................... 27
Interest Reset Period............................................. 27
Investment Earnings............................................... 38
Investment Income................................................. 7
IRS............................................................... 48, 49
LIBOR............................................................. 29
LIBOR Business Day................................................ 30
LIBOR Determination Date.......................................... 30
LIBOR Security.................................................... 27
Lien Certificate.................................................. 34
Mandatory Special Redemption...................................... 12
Money Market Yield................................................ 29
Motorcycles....................................................... 6, 48
Note Distribution Account......................................... 37
Note Pool Factor.................................................. 20
Noteholder........................................................ 10
Notes............................................................. 1
Obligor........................................................... 9, 13, 15
OID............................................................... 50
Other Manufacturers............................................... 1, 6, 18, 48
Owner Trust....................................................... 3
Participants...................................................... 22
Pass-Through Rate................................................. 5, 27
67
<PAGE>
Pool Balance...................................................... 15, 18, 20
Pooling and Servicing Agreement................................... 3
Pre-Funded Amount................................................. 6
Pre-Funding Account............................................... 1, 6
Prospectus Supplement............................................. 1
Purchase Amount................................................... 35
Rating Agency..................................................... 10, 16
Registrar of Titles............................................... 34
Registration Statement............................................ 2
Related Documents................................................. 24
Reserve Fund...................................................... 40
Revolving Period.................................................. 6
Sale and Servicing Agreements..................................... 6
Schedule of Contracts............................................. 34
Securities........................................................ 1
Securities Act.................................................... 2
Security Owners................................................... 31
Securityholders................................................... 12
Servicer.......................................................... 1
Servicer Default.................................................. 42
Servicing Fee..................................................... 39
Servicing Fee Rate................................................ 39
Spread............................................................ 27
Spread Multiplier................................................. 27
Strip Certificates................................................ 5
Strip Notes....................................................... 4
Subsequent Contracts.............................................. 1, 6
Subsequent Purchase Agreement..................................... 14
Subsequent Transfer Date.......................................... 12
Telerate Page 3750................................................ 30
The Contracts..................................................... 19
Transfer and Sale Agreement....................................... 6
Treasury bills.................................................... 30
Treasury Rate..................................................... 30
Treasury Rate Determination Date.................................. 30
Treasury Rate Security............................................ 27
Trust............................................................. 1
Trust Accounts.................................................... 37
Trust Agreement................................................... 3
Trust Depositor................................................... 1
Trust Property.................................................... 1
Trustee........................................................... 1
UCC............................................................... 12, 14, 31
Underwriting Agreements........................................... 2, 60
68
<PAGE>
- -------------------------------------- ------------------------------------
- -------------------------------------- ------------------------------------
NO DEALER, SALESMAN OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY, AS SPONSOR OF THE
TRUSTS OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF
ANY OFFER TO BUY ANY SECURITY OTHER
THAN THE SECURITIES OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES TO ANY HARLEY-DAVIDSON EAGLEMARK
PERSON IN ANY JURISDICTION IN WHICH MOTORCYCLE TRUSTS
THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR EAGLEMARK, INC.
SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------------------ ------------------------
TABLE OF CONTENTS PROSPECTUS
PAGE ------------------------
----
Available Information....... 3
Summary of Terms............ 4
Risk Factors................ 13
The Trusts.................. 18
Harley-Davidson Motorcycles. 19
Other Manufacturers......... 20
The Contracts............... 20
Weighted Average Life of
the Securities............. 21
Pool Factors and Trading
Information................ 21
Use of Proceeds............. 22
Eaglemark Financial
Services, Inc., Eaglemark, Inc.
and the Trust Depositors... 22
Description of the Notes.... 23
Description of the
Certificates............... 27
Certain Information
Regarding the Securities... 28
Description of the Transfer
and Sale Agreements........ 35
Description of the Sale
and Servicing Agreements
and Pooling and Servicing
Agreements.................. 37
Certain Legal Aspects of
the Contracts............... 47
Federal Income Tax
Consequences................ 50
Owner Trusts................. 51
Grantor Trusts............... 57
Tax Treatment of FASIT....... 60
Certain State Tax
Consequences................ 61
ERISA Considerations......... 61 ____________, 1997
Plan of Distribution......... 62
Legal Matters................ 63
------------------------
UNTIL ______________ , 1997,
ALL DEALERS EFFECTING TRANSACTIONS
IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF
- ------------------------------------- ------------------------------------
- ------------------------------------- ------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND HAS BECOME EFFECTIVE. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
INFORMATION HEREIN HAS BEEN COMPLETED. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED [ ], 199
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [ ], 199 )
$[ ]
HARLEY-DAVIDSON MOTORCYCLE
CONTRACT BACKED CERTIFICATES
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST 199 -[ ]
[ ]% CERTIFICATES, CLASS A
[ ]% CERTIFICATES, CLASS B
EAGLEMARK, INC.
SELLER AND SERVICER
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
TRUST DEPOSITOR
The Harley-Davidson Eaglemark Motorcycle Trust 199 -[ ] (the "TRUST")
Harley-Davidson Motorcycle Contract Backed Certificates described in this
Prospectus Supplement will consist of one class of senior certificates (the
"CLASS A CERTIFICATES") and one class of subordinated certificates (the "CLASS B
CERTIFICATES" and, together with the Class A Certificates, the "CERTIFICATES").
The Class A Certificates and the Class B Certificates offered hereby will
evidence in the aggregate undivided ownership interests of % (the "CLASS A
PERCENTAGE") and % (the "CLASS B PERCENTAGE"), respectively, in the Trust.
The Trust will be created by Eaglemark Customer Funding Corporation-[ ], a 100%
owned subsidiary of Eaglemark, Inc., as trust depositor (the "TRUST DEPOSITOR")
pursuant to a Pooling and Servicing Agreement dated as of [ ], 199 (the
"AGREEMENT"), to be entered into by and among the Trust Depositor, Eaglemark,
Inc. ("EAGLEMARK"), as servicer (in such capacity, the "SERVICER") and Harris
Trust and Savings Bank, as trustee (in such capacity, the "TRUSTEE"). (COVER
CONTINUED ON NEXT PAGE)
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE POTENTIAL RISK FACTORS
SET FORTH UNDER "RISK FACTORS" ON PAGE 12 HEREOF AND ON PAGE 12 OF THE
PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SERVICER, THE TRUST DEPOSITOR OR
ANY AFFILIATE THEREOF, EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN. THE
CERTIFICATES DO NOT REPRESENT OBLIGATIONS OF, AND WILL NOT BE INSURED OR
GUARANTEED BY, ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Underwriter has agreed to purchase the Certificates [from the Seller] as
provided herein, and the Certificates will be offered by the Underwriter from
time to time as provided herein in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. The aggregate proceeds to
the Seller from the sale of the Securities are expected to be $ before
deducting expenses payable by the Seller of approximately $ .
The Certificates are offered subject to receipt and acceptance by the
Underwriter and to the Underwriter's right to reject any offer in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Certificates will be made in book-entry form through the
facilities of The Depository Trust Company ("DTC") on or about , 199 .
Underwriter of the Certificates
[ ]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS [ ], 1997
<PAGE>
The rights of the Class B Certificateholders to receive distributions from the
assets of the Trust with respect to interest will be subordinate to the rights
of the Class A Certificateholders to receive distributions with respect to
interest, and the rights of the Class B Certificateholders to receive
distributions of principal will be subordinate to the rights of the Class A
Certificateholders to receive distributions of interest and principal. See
"SUMMARY OF TERMS-- SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE FUND" and
"DESCRIPTION OF THE CERTIFICATES--SUBORDINATION OF THE CLASS B CERTIFICATES;
RESERVE FUND."
The Trust property will consist of an initial pool of fixed-rate, simple
interest motorcycle conditional sales contracts (the "INITIAL CONTRACTS" which,
together with any Subsequent Contracts as defined below, are collectively the
"CONTRACTS") relating to Motorcycles manufactured by Harley-Davidson, Inc.
("HARLEY-DAVIDSON") or, in certain limited instances as described herein,
Motorcycles manufactured by an affiliate of Harley-Davidson, Buell Motorcycle
Company ("BUELL"), including all rights to receive payments collected on such
Initial Contracts on or after [ ], 199 (the "INITIAL CUTOFF DATE"). The
Trust property also will consist of security interests in the motorcycles
financed through the Contracts; proceeds from certain insurance policies as
described in "DESCRIPTION OF THE CERTIFICATES -- INDIVIDUAL MOTORCYCLE
INSURANCE;" an Agreement to Deposit Contracts dated as of [ ], 199 from the
Trust Depositor in favor of the Trust (the "DEPOSIT AGREEMENT"); rights under a
Security Agreement in favor of the Trust (the "SECURITY AGREEMENT") securing the
Trust Depositor's obligation under the Deposit Agreement to purchase Subsequent
Contracts and transfer the same to the Trust, through the pledge of monies on
deposit in a collateral account (the "PRE-FUNDING ACCOUNT") established
thereunder; amounts held for the Trust in the Collection Account; and certain
other property as more fully described herein.
The Contracts were originated by Eaglemark indirectly through
Harley-Davidson motorcycle dealers. Contracts with an aggregate principal
balance (as of the Initial Cutoff Date) of $ will be sold by Eaglemark
(in such capacity, the "SELLER") to the Trust Depositor on the date of issuance
of the Certificates pursuant to a Transfer and Sale Agreement dated as of
[ ], 199 by and between the Seller and the Trust Depositor (the "TRANSFER
AND SALE AGREEMENT") and will be further transferred and assigned by the Trust
Depositor to the Trust on such date. Additional fixed-rate, simple interest
Harley-Davidson (and, in limited instances, Buell) motorcycle conditional sales
contracts (the "SUBSEQUENT CONTRACTS") will be sold from time to time by the
Seller to the Trust Depositor at or before the end of the Funding Period (as
defined herein) and concurrently, in accordance with the Deposit Agreement,
transferred by the Trust Depositor to the Trust, with the purchase price to be
payable to the Seller from funds on deposit in the Pre-Funding Account.
Principal, and interest to the extent of the Class A Pass-Through Rate of
[ ]% per annum (the "CLASS A PASS-THROUGH RATE") and the Class B Pass-Through
Rate of [ ]% per annum (the "CLASS B PASS-THROUGH RATE"), will be distributable
with respect to the Class A Certificates and the Class B Certificates,
respectively, on the fifteenth day of each month (or, if such fifteenth day is
not a Business Day, the first Business Day thereafter) beginning [ ], 199
(each, a "PAYMENT DATE"). The Class A Initial Certificate Principal Balance and
the Class B Initial Certificate Principal Balance represent the aggregate of the
Principal Balances of the Initial Contracts on the Initial Cutoff Date, plus
amounts on deposit in the Pre-Funding Account as of the date of issuance of the
Certificates. The final scheduled Payment Date of the Certificates will be on
[ ] (the "FINAL SCHEDULED PAYMENT DATE"). See "DESCRIPTION OF THE
CERTIFICATES." However, payment in full of the Certificates could occur earlier
than such date as described herein. In addition, the Certificates will be
subject to prepayment in whole, but not in part, on any Payment Date on which
the Seller exercises its option to purchase the Contracts. The Seller may
purchase the Contracts when the aggregate outstanding Class A Certificate
Balance and Class B Certificate Balance has declined to less than 10% of the
aggregate Class A Initial Certificate Balance and Class B Initial Certificate
Balance. The Certificates will also be subject to partial mandatory prepayment,
without premium, in the event that funds remain in the Pre-Funding Account at
the end of the Funding Period (as defined herein).
It is a condition of issuance that the Class A Certificates be rated AAA by
Standard & Poor's Ratings Services ("S&P") and Aaa by Moody's Investors Service,
Inc. ("MOODY'S"), and the Class B Certificates be rated at least by S&P
and by Moody's (S&P, together with Moody's, the "RATING AGENCIES").
THE SECURITIES ARE BEING OFFERED [BY THE SELLER] FROM TIME TO TIME PURSUANT
TO THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ACCOMPANYING THIS PROSPECTUS
SUPPLEMENT. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION
ABOUT THE OFFERING OF THE SECURITIES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL. SALES OF THE SECURITIES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
TO THE EXTENT THAT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT MODIFY
STATEMENTS CONTAINED IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
<PAGE>
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Certificate Underwriter expects, but is not
obligated, to make a market in the Certificates. There is no assurance that any
such market will develop, or if one does develop, that it will continue or
provide sufficient liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT AFFECT THE PRICE OF THE CERTIFICATES. SUCH TRANSACTIONS MAY INCLUDE THE
PURCHASE OF CERTIFICATES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION
OF THESE TRANSACTIONS, SEE "UNDERWRITING" HEREIN.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, the Seller or such
Underwriter will promptly deliver, or cause to be delivered, without charge, a
paper copy of the Prospectus Supplement and Prospectus.
UNTIL 90 DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
REPORT TO SECURITYHOLDERS
Unless and until the Certificates are issued in definitive certificate form,
monthly and annual unaudited reports containing information concerning the
Contracts will be prepared by the Servicer and sent on behalf of the trust only
to Cede & Co., as nominee of DTC and registered holder of the Certificates. See
"CERTAIN INFORMATION REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" and
"--REPORTS TO SECURITYHOLDERS" in the accompanying Prospectus. Such reports will
not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Servicer will file with the Securities and
Exchange Commission (the "COMMISSION") such periodic reports with respect to the
Trust as are required under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations of the Commission thereunder.
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TABLE OF CONTENTS
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SUMMARY OF TERMS....................................................... 1
RISK FACTORS........................................................... 12
STRUCTURE OF THE TRANSACTION........................................... 15
USE OF PROCEEDS........................................................ 16
THE CONTRACTS.......................................................... 16
HARLEY-DAVIDSON MOTORCYCLES............................................ 26
YIELD AND PREPAYMENT CONSIDERATIONS.................................... 26
EAGLEMARK FINANCIAL SERVICES, INC.; EAGLEMARK, INC. ................... 27
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]........................ 27
DESCRIPTION OF THE CERTIFICATES........................................ 28
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS; REPURCHASE
OBLIGATIONS.......................................................... 43
FEDERAL INCOME TAX CONSEQUENCES........................................ 46
ERISA CONSIDERATIONS................................................... 47
UNDERWRITING........................................................... 49
LEGAL MATTERS.......................................................... 51
INDEX OF TERMS......................................................... 49
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SUMMARY OF TERMS
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE HEREIN AND IN THE PROSPECTUS. CERTAIN
CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT ON THE PAGES INDICATED IN THE "INDEX OF DEFINED TERMS" ON PAGE 51 OR,
TO THE EXTENT NOT DEFINED HEREIN, HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN
THE PROSPECTUS.
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Securities Offered........... Certificates for Harley-Davidson Motorcycle Contracts [ ]%
Certificates, Class A ("CLASS A CERTIFICATES") and [ ]%
Certificates, Class B ("CLASS B CERTIFICATES" and, together
with the Class A Certificates, the "Certificates"). The
Class A Certificates and the Class B Certificates will
evidence in the aggregate undivided ownership interests of
[ ]% (the "CLASS A PERCENTAGE") and [ ]% (the "CLASS B
PERCENTAGE"), respectively, in the Trust. The rights of the
Class B Certificateholders to receive distributions with
respect to assets of the Trust will be subordinate to the
right of the Class A Certificateholders to the extent
described herein. See "SUMMARY OF TERMS--SUBORDINATION OF
THE CLASS B CERTIFICATES; RESERVE FUND" and "DESCRIPTION OF
THE CERTIFICATES--SUBORDINATION OF THE CLASS B CERTIFICATES;
RESERVE FUND" below.
Trust........................ Harley-Davidson Eaglemark Motorcycle Trust 199 -[ ]
(the "TRUST"), to be created by the Trust Depositor pursuant
to the Agreement.
Class A Initial Certificate
Balance and
Class B Initial Certificate
Balance.................... $[ ] (the "CLASS A INITIAL CERTIFICATE BALANCE")
representing the aggregate Principal Balance of the Initial
Contracts on [ ], 199 (the "INITIAL CUTOFF DATE") plus
the amount on deposit in the Pre-Funding Account as of the
Closing Date multiplied by the Class A Percentage, and
$[ ] (the "CLASS B INITIAL CERTIFICATE BALANCE")
representing the aggregate Principal Balance of the Initial
Contracts on the Initial Cutoff Date plus the amount on
deposit in the Pre-Funding Account as of the Closing Date
multiplied by the Class B Percentage.
Trustee...................... Harris Trust and Savings Bank, an Illinois banking
corporation (the "TRUSTEE"). The Trustee will also act as
Paying Agent.
Trust Depositor.............. Eaglemark Customer Funding Corporation-[ ], a 100%
owned subsidiary of Eaglemark, Inc. (the "TRUST DEPOSITOR").
Seller and Servicer.......... Eaglemark, Inc. ("EAGLEMARK" or the "SELLER" or the
"SELLER/SERVICER" or, solely in its capacity as Servicer,
the "SERVICER"), a 100% owned subsidiary of Eaglemark
Financial Services, Inc.
Trust Property............... The Trust property consists of, among other things, the pool
of Initial Contracts together with any Subsequent Contracts
transferred to the Trust, and all rights, benefits,
obligations and proceeds arising therefrom or in connection
therewith, including security interests in the
Harley-Davidson (and, in certain limited instances, Buell)
motorcycles (the "MOTORCYCLES"; see "THE CONTRACTS--HARLEY-
DAVIDSON MOTORCYCLES" below) securing such Contracts and
proceeds, if any, from certain insurance policies with
respect to
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individual Motorcycles. No more than [ ]% of the Principal
Balance of all Contracts conveyed to the Trust (including
all Subsequent Contracts) will relate to Buell motorcycles.
Distributions on the
Certificates............... Distributions of interest and principal on the Certificates
will be made on the fifteenth day of each month or, if such
day is not a Business Day, the next succeeding Business Day,
commencing [ ], 199 (each, a "PAYMENT DATE"). In
addition, if amounts remain on deposit in the Pre-Funding
Account at the end of the Funding Period (as defined
herein), such amounts will be distributed on the
corresponding Payment Date as a Special Distribution of
principal (see "MANDATORY SPECIAL DISTRIBUTION" below).
Distributions on any Payment Date will be made to the
holders of the related Certificates who are of record on the
last day immediately preceding the calendar month in which
such Payment Date occurs, whether or not such day is a
Business Day (each, a "RECORD DATE").
Class A Pass-Through Rate and
Class B Pass-Through
Rate....................... [ ]% per annum for the Class A Certificates and [ ]% per
annum for the Class B Certificates, both computed on the
basis of a 360-day year consisting of twelve 30-day months
(the "CLASS A PASS-THROUGH RATE" and the "CLASS B
PASS-THROUGH RATE", respectively).
Monthly Interest
Distributions.............. The Trustee will distribute, to the extent of funds
available for the payment thereof, on each Payment Date to
the holders of record of the Class A Certificates (the
"CLASS A CERTIFICATEHOLDERS") and the holders of record of
the Class B Certificates (the "CLASS B CERTIFICATEHOLDERS")
as of the Record Date, the Class A Interest Distributable
Amount and the Class B Interest Distributable Amount,
respectively, as described immediately below. The "CLASS A
INTEREST DISTRIBUTABLE AMOUNT" with respect to any Payment
Date will be an amount equal to the sum of (i) the product
of (a) one-twelfth (or, with respect to the first Payment
Date, a fraction, the numerator of which equals the number
of days from and including the Closing Date to but excluding
the first Payment Date and the denominator of which equals
360) of the Class A Pass-Through Rate and (b) the Class A
Certificate Balance (defined below) as of the immediately
preceding Payment Date (after giving effect to distributions
of principal made on such immediately preceding Payment
Date) or, in the case of the first Payment Date, the Class A
Initial Certificate Balance, plus (ii) the Class A Interest
Carryover Shortfall (as defined below) for such Payment
Date. The "CLASS B INTEREST DISTRIBUTABLE AMOUNT" with
respect to any Payment Date (other than the first Payment
Date), will be an amount equal to the sum of (i) the product
of (a) one-twelfth (or, with respect to the first Payment
Date, a fraction the numerator of which equals the number of
days from and including the Closing Date to but excluding
the first Payment Date and the denominator of which equals
360) of the Class B Pass-Through Rate and (b) the Class B
Certificate Balance (defined below) as of the immediately
preceding Payment Date (after giving effect to distributions
of principal made on such immediately preceding Payment
Date) or, in the case of the first Payment Date, the Class B
Initial Certificate
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Balance, plus (ii) the Class B Interest Carryover Shortfall
(as defined below) for such Payment Date. As used herein,
"CLASS A CERTIFICATE BALANCE" means the Class A Initial
Certificate Balance, reduced by all amounts previously
distributed to Class A Certificateholders and allocable to
principal; "CLASS B CERTIFICATE BALANCE" means, initially,
the Class B Initial Certificate Principal Balance, and
thereafter, the amount by which the sum of the aggregate
Principal Balance of all Contracts, plus the Pre-Funded
Amount, exceeds the Class A Certificate Balance; "CLASS A
INTEREST CARRYOVER SHORTFALL" means, with respect to any
Payment Date, (i) the excess of the Class A Interest
Distributable Amount for the preceding Payment Date over the
amount of interest that was actually distributed to Class A
Certificateholders on such preceding Payment Date, plus (ii)
30 days of interest on the amount specified in clause (i),
to the extent permitted by law, at the Class A Pass-Through
Rate; and "CLASS B INTEREST CARRYOVER SHORTFALL" means, with
respect to any Payment Date, (i) the excess of the Class B
Interest Distributable Amount for the preceding Payment Date
over the amount of interest that was actually distributed to
Class B Certificateholders on such preceding Payment Date,
plus (ii) 30 days of interest on the amount specified in
clause (i), to the extent permitted by law, at the Class B
Pass-Through Rate.
The Class A Interest Distributable Amount and Class B
Interest Distributable Amount are first payable out of
Available Interest. "AVAILABLE INTEREST" means, with respect
to any Payment Date, the total (without duplication) of the
following amounts received by the Servicer on or in respect
of the Contracts during the calendar month preceding such
Payment Date (such calendar month period, with respect to
that Payment Date, being the related "DUE PERIOD"): (i) all
amounts received in respect of interest on the Contracts (as
well as late payment penalty fees and extension fees), (ii)
the interest component of all Net Liquidation Proceeds (as
defined in the Agreement) with respect to any Contract,
(iii) the interest component of the aggregate of the
Repurchase Prices (as defined in "STRUCTURE OF THE
TRANSACTION" below) for Contracts repurchased by the Seller
with respect to breaches of certain representations and
warranties, (iv) all Advances (as defined in "SUMMARY OF
TERMS--ADVANCES" below) made by the Servicer, (v) the
interest component of all amounts paid by the Seller in
connection with an optional repurchase of the Contracts in
the event that the aggregate of the Class A Certificate
Balance and Class B Certificate Balance is less than 10% of
the aggregate of the Class A Initial Certificate Balance and
Class B Initial Certificate Balance, (vi) all amounts
received in respect of Carrying Charges (as defined in
"SUMMARY OF TERMS-- INTEREST RESERVE" below) transferred
from the Interest Reserve Account (as defined herein), and
(vii) all amounts received in respect of interest,
dividends, gains, income and earnings on investment of funds
in the Collection Account and the Special Distribution
Subaccount, as defined in the Agreement (the "TRUST
ACCOUNTS"). Additionally, the Class A Interest Distributable
Amount with respect to any Payment Date is payable, to the
extent not paid from Available
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Interest as described above, from the Class B Percentage of
Available Principal (as defined in "SUMMARY OF
TERMS--MONTHLY PRINCIPAL DISTRIBUTIONS" below) for such
Payment Date. Finally, if not paid from the above-described
sources, the Class A Interest Distributable Amount and Class
B Interest Distributable Amount are payable from the Reserve
Fund. See "DESCRIPTION OF THE CERTIFICATES--PAYMENTS ON
CONTRACTS; AVAILABLE FUNDS, AVAILABLE INTEREST AND AVAILABLE
PRINCIPAL," "--CALCULATION OF DISTRIBUTABLE AMOUNTS," and
"--SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE FUND"
below).
Monthly Principal
Distributions.............. The Trustee will distribute, to the extent of funds
available for the payment thereof, on each Payment Date to
the Class A Certificateholders and the Class B
Certificateholders the Class A Principal Distributable
Amount and the Class B Principal Distributable Amount,
respectively. The "CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT"
with respect to any Payment Date, equals the sum of (i) the
product of the Class A Percentage and the Monthly Principal
(as defined below) for such Payment Date, plus (ii) the
Class A Principal Carryover Shortfall (as defined below) for
such Payment Date. The "CLASS B PRINCIPAL DISTRIBUTABLE
AMOUNT" with respect to any Payment Date equals the sum of
(i) the product of the Class B Percentage and the Monthly
Principal for such Payment Date, plus (ii) the Class B
Principal Carryover Shortfall (as defined below) for such
Payment Date. "MONTHLY PRINCIPAL" means, as to any Payment
Date, the following amount calculated as of the related
Determination Date: the difference between (i) the sum of
(A) the Principal Balance of the Contracts (as defined
below) as of the first day of the Due Period preceding the
Due Period in which such Payment Date occurs (or, in the
case of the first Payment Date, the Principal Balance of the
Contracts as of the Initial Cutoff Date), plus (B) the
Pre-Funded Amount on such date (or, in the case of the first
Payment Date, the Pre-Funded Amount on the Closing Date) and
(ii) the sum of (A) the Principal Balance of the Contracts
as of the first day of the Due Period in which such Payment
Date occurs, plus (B) the Pre-Funded Amount on such day,
plus (C) the amount of any Special Distribution occurring
from the day referred to in clause (i)(A) above to the day
referred to in clause (ii)(A) above; provided, that on the
Final Scheduled Payment Date, Monthly Principal shall equal
the aggregate of the Class A Certificate Balance and the
Class B Certificate Balance on such date (subject to
adjustments for Special Distributions). The "PRINCIPAL
BALANCE" of the Contracts means the aggregate of the unpaid
principal balance of each Contract as of the related Cutoff
Date, reduced by the sum of (x) all payments received by the
Servicer allocable to principal, plus (y) any reduction in
the principal balance of such Contract attributable to
bankruptcy court order. Also, the Principal Balance of the
following Contracts is deemed to be zero: (i) Contracts with
respect to which the Seller has given notice of the intent
to exercise an optional repurchase, or which the Seller has
in fact repurchased as a result of a breach of
representation or warranty; and (ii) Contracts as to which
extensive delinquencies or defaults exist beyond the
threshold levels set forth
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in the Agreement, or with respect to which a 90 day period
has elapsed following repossession of the related
Motorcycle. Also, as used herein, "CLASS A PRINCIPAL
CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the excess of (i) the Class A Principal Distributable
Amount for the preceding Payment Date over (ii) the amount
of principal that was actually distributed to Class A
Certificateholders on such preceding Payment Date; "CLASS B
PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Payment Date, the excess of (i) the Class B Principal
Distributable Amount for the preceding Payment Date over
(ii) the amount of principal that was actually distributed
to Class B Certificateholders on such preceding Payment
Date.
The Class A Principal Distributable Amount and Class B
Principal Distributable Amount are payable out of Available
Principal. "AVAILABLE PRINCIPAL" means, with respect to any
Payment Date, the total (without duplication) of the
following amounts received by the Servicer on or in respect
of the Contracts during the related Due Period: (i) all
amounts received in respect of principal on the Contracts,
(ii) the principal component of all Net Liquidation
Proceeds, (iii) the principal component of the aggregate of
the Repurchase Prices for Contracts repurchased by the
Seller with respect to breaches of certain representations
and warranties, and (iv) the principal component of all
amounts paid by the Seller in connection with an optional
repurchase of the Contracts in the event the Class A
Certificate Balance and Class B Certificate Balance is less
than 10% of the Class A Initial Certificate Balance and
Class B Initial Certificate Balance. Additionally, the Class
A Principal Distributable Amount and Class B Principal
Distributable Amount are payable, subject to certain
limitations, from remaining Available Interest (after
payment of the Class A Interest Distributable Amount, the
Class B Interest Distributable Amount, and certain other
costs therefrom) and from the Reserve Fund. See "DESCRIPTION
OF THE CERTIFICATES--PAYMENTS ON CONTRACTS; AVAILABLE FUNDS,
AVAILABLE INTEREST AND AVAILABLE PRINCIPAL," "--CALCULATION
OF DISTRIBUTABLE AMOUNTS," and "--SUBORDINATION OF THE CLASS
B CERTIFICATES; RESERVE FUND" below.
Subordination of the Class B
Certificates; Reserve
Fund....................... The rights of the Class B Certificateholders to receive
distributions to which they would otherwise be entitled with
respect to the Contracts will be subordinated to the rights
of the Class A Certificateholders.
The Class B Certificateholders will not receive any
distributions in respect of the Class B Interest
Distributable Amount on a Payment Date until the Class A
Interest Distributable Amount for such Payment Date has been
distributed to the Class A Certificateholders, and the Class
B Certificateholders will not receive any distributions of
the Class B Principal Distributable Amount for such Payment
Date until the Class A Interest Distributable Amount and the
Class A Principal Distributable Amount for such Payment Date
has been distributed to the Class A Certificateholders.
Distributions of the Class B Interest Distributable Amount,
to the extent of Available
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Interest (after payment of the Class A Interest
Distributable Amount for such Payment Date) and certain
available amounts on deposit in the Reserve Fund (as defined
herein), will not be subordinated to the payment of the
Class A Principal Distributable Amount.
The protection afforded to the Class A Certificateholders by
the subordination feature described above will be effected
by the preferential right of the Class A Certificateholders
to receive current distributions from collections on or in
respect of the Contracts and from the Reserve Fund to the
extent described herein.
Certificateholders will have the benefit of a segregated
trust account held by Harris Trust and Savings Bank as
collateral agent (in such capacity, the "RESERVE AGENT") for
the benefit of the Certificateholders (the "RESERVE FUND").
The Reserve Fund will not be part of the Trust. The Reserve
Fund will be created with an initial deposit by the Trust
Depositor of $[ ] (the "RESERVE FUND INITIAL DEPOSIT").
Monies in the Reserve Fund will thereafter be supplemented
on each Payment Date by the deposit therein of certain
monies (such monies, together with the Reserve Fund Initial
Deposit, the "RESERVE FUND DEPOSITS"). The Reserve Agent
will retain Reserve Fund Deposits in the Reserve Fund until
the amounts therein reach amounts specified in the Reserve
Fund Agreement (as further defined herein the "RESERVE FUND
REQUISITE AMOUNT"); additionally, on each Subsequent
Purchase Date, to the extent necessary, the Seller will
contribute additional monies into the Reserve Fund ("RESERVE
FUND ADDITIONAL DEPOSITS"). In the event and to the extent
the Reserve Fund Deposits exceed the Reserve Fund Requisite
Amount on a Payment Date (after giving effect to all other
withdrawals from the Reserve Fund required to be made on
such date), such excess amounts will be released from the
Reserve Fund to the Trust Depositor.
On each Payment Date, to the extent necessary and to the
extent monies are available in the Reserve Fund, monies will
be withdrawn from the Reserve Fund for distribution first to
the Class A Certificateholders to the extent necessary to
pay the Class A Interest Distributable Amount for such
Payment Date, second, to the Class B Certificateholders to
the extent necessary to pay the Class B Interest
Distributable Amount for such Payment Date, third, to the
Class A Certificateholders to the extent necessary to pay
the Class A Principal Distributable Amount for such Payment
Date, and fourth, to the Class B Certificateholders to the
extent necessary to pay the Class B Principal Distributable
Amount for such Payment Date. See "DESCRIPTION OF THE
CERTIFICATES--SUBORDINATION OF THE CLASS B CERTIFICATES;
RESERVE FUND" below.
The Contracts................ The Contracts will be fixed-rate, simple-interest
conditional sales contracts for Motorcycles, including any
and all rights to receive payments collected thereunder on
or after the related Cutoff Date (as defined herein) and
security interests in the Motorcycles financed thereby.
On the Closing Date, the Trust Depositor will sell, transfer
and assign to the Trust pursuant to the Agreement Initial
Contracts with an
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aggregate principal balance of $[ ] as of [ ], the
Initial Cutoff Date. Following the Closing Date, pursuant to
the Deposit Agreement, the Trust Depositor will be
obligated, subject only to the availability thereof, to
sell, and the Trust will be obligated to purchase, subject
to the satisfaction of certain conditions set forth therein,
Subsequent Contracts from time to time during the Funding
Period (as defined below) having an aggregate principal
balance equal to $[ ] such amount being equal to the
amount on deposit in the Pre-Funding Account established
under the Security Agreement (the "PRE-FUNDED AMOUNT") on
the Closing Date. With respect to each transfer of
Subsequent Contracts to the Trust, the Trust Depositor will
designate as a cutoff date (each a "SUBSEQUENT CUTOFF DATE")
the date as of which such Subsequent Contracts are deemed
sold to the Trust. Each date on which Subsequent Contracts
are conveyed is referred to herein as a "SUBSEQUENT TRANSFER
DATE".
The Initial Contracts and the Subsequent Contracts will be
selected from retail Motorcycle installment sales contracts
in the Seller's portfolio based on the criteria specified in
the Transfer and Sale Agreement executed and delivered on
the Closing Date. The Contracts arise and will arise from
loans to Obligors located in 50 states and the District of
Columbia. As of the Initial Cutoff Date, the annual
percentage rate of interest on the Initial Contracts ranges
from [ ]% to [ ]% with a weighted average of approximately
[ ]%. The Initial Contracts had a weighted average term to
scheduled maturity, as of origination, of approximately [ ]
months, and a weighted average term to scheduled maturity,
as of the Initial Cutoff Date, of approximately [ ] months.
The final scheduled payment date on the Initial Contract
with the latest maturity is no later than [ ]. No
Contract (including any Subsequent Contract) will have a
scheduled maturity later than [ ]. The Contracts generally
are or will be prepayable at any time without penalty to the
Obligor. Following the transfer of Subsequent Contracts to
the Trust, the aggregate characteristics of the entire pool
of Contracts may vary from those of the Initial Contracts as
of the Initial Cutoff Date as to the criteria identified and
described above and in "THE CONTRACTS" below.
Pre-Funding Account.......... During the period (the "FUNDING PERIOD") from and including
the Closing Date until the earliest of (a) the Payment Date
on which the amount on deposit in the Pre-Funding Account is
less than $100,000, (b) the date on which an Event of
Termination occurs with respect to the Servicer under the
Agreement, (c) the date on which certain events of
insolvency occur with respect to the Seller, or (d) the
close of business on the date which is 90 days from and
including the Closing Date, the Pre-Funded Amount will be
maintained in the Pre-Funding Account established under the
Security Agreement as a collateral account pledged by the
Trust Depositor in favor of the Trustee to secure the Trust
Depositor's obligations under the Deposit Agreement to
purchase and transfer Subsequent Contracts to the Trust. The
Pre-Funded Amount will initially equal $[ ] and, during
the Funding Period, will be
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reduced by the amount thereof that the Trust Depositor uses
to purchase Subsequent Contracts from the Seller. The Trust
Depositor expects that the Pre-Funded Amount will be reduced
to less than [$ ] by the Payment Date occurring in
[ ]. Any Pre-Funded Amount remaining at the end of the
Funding Period will be payable to the Certificateholders as
described below in "MANDATORY SPECIAL DISTRIBUTIONS". The
Pre-Funding Account will not be part of the Trust.
Mandatory Special
Distribution............... The Class A Certificates and Class B Certificates will be
prepaid in part, without premium, on the Payment Date on or
immediately following the last day of the Funding Period in
the event that any amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of
all Subsequent Contracts, including any such purchase on
such date (a "SPECIAL DISTRIBUTION"). The aggregate
principal amount of Class A Certificates and Class B
Certificates to be prepaid will be an amount equal to the
amount then on deposit in the Pre-Funding Account multiplied
by the Class A Percentage and Class B Percentage,
respectively.
Interest Reserve Account..... The Trust Depositor has established, and funded with an
initial deposit on the Closing Date, a separate collateral
account under the Security Agreement (the "INTEREST RESERVE
ACCOUNT") for the purpose of providing additional funds (for
payment to the Trust of Carrying Charges as described below)
to pay certain distributions on Payment Dates occurring
during (and on the first Payment Date following the end of)
the Funding Period. In addition to the initial deposit, all
investment earnings with respect to the Pre-Funded Amount
are to be deposited into the Interest Reserve Account and,
pursuant to the Deposit Agreement, the Trust Depositor is
obligated to pay to the Trust, on each Payment Date
described above, amounts in respect of Carrying Charges from
such account. "CARRYING CHARGES" means the sum of (i) the
product of (A) one-twelfth (1/12th) of the sum of (x) the
Class A Pass-Through Rate and (y)[ ]% times (B) the Class A
Percentage of the Pre-Funded Amount as of the beginning of
the related Due Period plus (ii) the product of (A)
one-twelfth (1/12th) of the sum of (x) the Class B
Pass-Through Rate and (y) [ %] times] (B) the Class B
Percentage of the Pre-Funded Amount as of the beginning of
the related Due Period. The Interest Reserve Account has
been established to account for the fact that a portion of
the proceeds obtained from the sale of Certificates will be
initially deposited in the Pre-Funding Account (as the
initial Pre-Funded Amount) rather than invested in
Contracts, and the monthly investment earnings on such
Pre-Funded Amount (until the Pre-Funded Amount is used to
purchase Subsequent Contracts) are expected to be less than
the Class A Pass-Through Rate and Class B Pass-Through Rate,
with respect to the corresponding portion of the Class A
Certificate Balance and Class B Certificate Balance and the
amount necessary to pay the Trustee's Fee. The Interest
Reserve Account is not designed to provide any protection
against losses on the Contracts in the Trust. After the
Funding Period, money remaining in the Interest Reserve
Account will be
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released to the Trust Depositor free and clear of the lien
of the Security Agreement. The Interest Reserve Account will
not be part of the Trust.
Advances..................... The Servicer is obligated to advance each month an amount
equal to accrued and unpaid interest on the Contracts which
was delinquent with respect to the related Due Period (each
an "ADVANCE"), but only to the extent that the Servicer
believes that the amount of such Advance will be recoverable
from collections on the Contracts. The Servicer will be
entitled to reimbursement of outstanding Advances on any
Payment Date by means of a first priority withdrawal of
Available Funds then held in the Collection Account (as
defined herein). See "DESCRIPTION OF THE
CERTIFICATES--ADVANCES."
Mandatory Repurchases by the
Seller..................... Under the Transfer and Sale Agreement, the Seller has
agreed, in the event of a breach of certain representations
and warranties made by the Seller and contained therein
which materially and adversely affects the Trust's interest
in any Contract, to repurchase such Contract within 90 days,
unless such breach is cured. See "DESCRIPTION OF THE
CERTIFICATES--CONVEYANCE OF CONTRACTS."
Repurchase Option............ The Seller will have the option to repurchase all of the
outstanding Contracts on any Payment Date on which the
aggregate of the Class A Certificate Balance and Class B
Certificate Balance is less than 10% of the Class A Initial
Certificate Balance and of the Class B Initial Certificate
Balance, at a price equal to the aggregate of the Class A
Certificate Balance and Class B Certificate Balance on the
prior Payment Date plus the aggregate of the Class A
Interest Distributable Amount and the Class B Interest
Distributable Amount for the current Payment Date and any
accrued and unpaid fees to the date of such repurchase. See
"DESCRIPTION OF THE CERTIFICATES-- REPURCHASE OPTION."
Security Interests and Other
Aspects of the Contracts... In connection with the establishment of the Trust as well as
the transfer of contracts (including Subsequent Contracts)
to the Trust, security interests in the Motorcycles securing
the Contracts have been (or will be) conveyed and assigned
by (i) the Seller to the Trust Depositor pursuant to the
Transfer and Sale Agreement (and, in the case of Subsequent
Contracts, the related Subsequent Purchase Agreement as
defined therein and executed thereunder) and (ii) the Trust
Depositor to the Trust pursuant to the Agreement (and, in
the case of Subsequent Contracts, the related Subsequent
Transfer Agreement as defined herein and executed
thereunder). The Agreement will designate the Servicer as
custodian to maintain possession, as the Trustee's agent, of
the Contracts and any other documents relating to the
Motorcycles. Uniform Commercial Code financing statements
will be filed in both Nevada and Illinois, reflecting the
conveyance and assignment of the Contracts to the Trust
Depositor from the Seller and from the Trust Depositor to
the Trust, and the Seller's and the Trust Depositor's
accounting records and computer systems will also reflect
such conveyance and assignment. To facilitate servicing and
save administrative costs,
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
such documents will not be segregated from other similar
documents that are in the Servicer's possession. However,
the Contracts will be stamped to reflect their conveyance
and assignment to the Trust. If, however, through fraud,
negligence or otherwise, a subsequent purchaser were able to
take physical possession of the Contracts without notice of
such conveyance and assignment, the Trust's interest in the
Contracts could be defeated. In addition, due to
administrative burden and expense, the certificates of title
to the Motorcycles will not be amended or reissued to
reflect the assignment of the Seller's security interest in
the Motorcycles related to the Contracts to the Trust
Depositor or the Trust. In the absence of amendments to the
certificates of title, the Trustee will not have a perfected
security interest in the Motorcycles in some states.
Further, Federal and state consumer protection laws impose
requirements upon creditors in connection with extensions of
credit and collections on conditional sales contracts, and
certain of these laws make an assignee of such a contract
liable to the obligor thereon for any violation of such laws
by the lender. The Seller has agreed to repurchase any
Contract as to which it has failed to perfect a security
interest in the Motorcycle securing such Contract, or as to
which a breach of federal or state laws exists if such
breach materially adversely affects the Trust's interest in
such Contract, if such failure or breach has not been cured
within the time period specified in the Transfer and Sole
Agreement. See "SECURITY INTERESTS AND OTHER ASPECTS OF THE
CONTRACTS; REPURCHASE OBLIGATIONS" below.
Monthly Servicing Fee........ The Servicer will be entitled to receive for each Due Period
a monthly servicing fee (the "MONTHLY SERVICING FEE") equal
to 1/12th of [ ]% of the Principal Balance of the Contracts
as of the beginning of such Due Period. The Servicer will
also be entitled to receive any extension fees or late
payment penalty fees paid by Obligors (collectively with the
Monthly Servicing Fee, the "SERVICING FEE"). The Servicing
Fee is payable from Available Interest, prior to the payment
of the Class A Distributable Amount and the Class B
Distributable Amount. See "DESCRIPTION OF THE CERTIFICATES--
SERVICING COMPENSATION AND PAYMENT OF EXPENSES," and
"--RIGHTS UPON AN EVENT OF TERMINATION" below.
Tax Status................... In the opinion of Winston & Strawn, federal income tax
counsel to the Trust Depositor, the Trust will be classified
as a grantor trust for federal income tax purposes and not
as an association taxable as a corporation. Each
Certificateholder will be treated as the owner of an
undivided interest in the assets of the Trust, including the
Contracts. Accordingly, each Certificateholder must report
on its federal income tax return its share of income from
the Contracts and, subject to limitations on deductions by
individuals, estates and trusts, may deduct its share of the
reasonable fees paid by the Trust, as if such
Certificateholder held its share of the assets of the Trust
directly. Furthermore, the Certificates may represent
interests in "STRIPPED BONDS" and "STRIPPED COUPONS" within
the meaning of Section 1286 of the Internal Revenue Code of
1986, as amended
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
(the "CODE"). See "FEDERAL INCOME TAX CONSEQUENCES--GRANTOR
TRUST" in the Prospectus.
ERISA Considerations......... After the expiration of the Funding Period, the Class A
Certificates will be eligible for purchase by employee
benefit plans. Any plan fiduciary who proposes to cause a
plan to acquire any of the Certificates should consult with
its own counsel with respect to the applicability of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code to such investment, including the
availability of any class or individual ERISA prohibited
transaction exemption. See "ERISA CONSIDERATIONS" below.
The Class B Certificates are not eligible for purchase by
(i) employee benefit plans subject to ERISA, or (ii)
individual retirement accounts and other retirement plans
subject to Section 4975 of the Code, other than through an
insurance company general account after the expiration of
the Funding Period. See "ERISA CONSIDERATIONS" below.
Ratings...................... It is a condition to the closing that the Class A
Certificates be rated Aaa by Moody's and AAA by S&P and the
Class B Certificates be rated at least [ ] by Moody's and
[ ] by S&P. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the rating agency. In the event
that the rating initially assigned to the Certificates is
subsequently lowered or withdrawn for any reason, no person
or entity will be obligated to provide any additional credit
enhancement with respect to the Certificates.
</TABLE>
11
<PAGE>
RISK FACTORS
THE CONTRACTS AND REINVESTMENT RISK ASSOCIATED WITH THE PRE-FUNDING ACCOUNT.
On the Closing Date, the Trust Depositor will transfer $[ ] of Initial
Contracts to the Trust, which Initial Contracts the Trust Depositor purchased
from the Seller using part of the proceeds of the Certificates sold to
investors. The Trust Depositor will pledge $[sp4.] I.E., the remaining
Certificate proceeds (representing the Pre-Funded Amount) pursuant to the
Security Agreement in favor of the Trust, and such amount will be deposited into
the Pre-Funding Account maintained by Harris Trust and Savings Bank as
collateral agent under the Security Agreement (the "COLLATERAL AGENT"). Such
pledge will secure the Trust Depositor's obligation, in favor of the Trust, to
purchase from the Seller and transfer to the Trust Subsequent Contracts in a
principal amount equal to the initial Pre-Funded Amount at or before the end of
the Funding Period. The Pre-Funding Account will not be a part of or otherwise
includible in the Trust and will be a segregated trust account held by the Trust
Depositor for the benefit of the Trustee. Any amounts held on deposit in the
Pre-Funding Account and any investment earnings thereon are owned by, and will
be taxable to, the Trust Depositor for federal income tax purposes. If the
Seller fails to originate a principal amount of eligible Contracts during the
Funding Period which is at least equal to the Pre-Funded Amount, the Trust
Depositor will be unable to acquire sufficient Subsequent Contracts to transfer
to the Trust on one or more Subsequent Transfer Dates, thereby resulting in a
Special Distribution and prepayment of principal to the Certificateholders as
described in the following paragraph. See "--TRUST'S RELATIONSHIP TO THE TRUST
DEPOSITOR AND SELLER" below. In addition, any conveyance of Subsequent Contracts
is subject to the satisfaction, on or before the related Subsequent Transfer
Date, of the following conditions, among others: (i) each such Subsequent
Contract satisfies the eligibility criteria specified in the Transfer and Sale
Agreement and the related Subsequent Purchase Agreement executed thereunder;
(ii) as of the applicable Subsequent Cutoff Date, no Contract in the Trust,
including the Subsequent Contracts that the Trust Depositor will be conveying as
of such Subsequent Cutoff Date, will have a scheduled maturity date later than
[ ]; (iii) the Trust Depositor shall have executed and delivered in
favor of the Trust a written assignment (a "SUBSEQUENT TRANSFER AGREEMENT")
conveying such Subsequent Contracts to the Trust (including a schedule
identifying such Subsequent Contracts); (iv) the Trust Depositor shall have
delivered certain opinions of counsel to the Trustee, the Placement Agent and
the Rating Agencies with respect to the validity and other aspects of the
conveyance of all such Subsequent Contracts; and (v) the Rating Agencies shall
have each notified the Trust Depositor and the Trustee in writing that,
following the addition of such Subsequent Contracts, the Class A Certificates
will be rated AAA by S&P and Aaa by Moody's and the Class B Certificates will be
rated at least [ ] by S&P and [ ] by Moody's, respectively. Such
confirmation of the ratings of the Class A Certificates and Class B Certificates
may depend on factors other than the characteristics of the Subsequent
Contracts, including the delinquency, repossession and net loss experience on
the Contracts in the Trust. Also, there can be no assurance that the Seller will
continue to generate Motorcycle conditional sales contracts that satisfy the
criteria set forth in the Transfer and Sale Agreement.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of Subsequent Contracts by the Trust
Depositor during the Funding Period, the Class A Certificateholders and Class B
Certificateholders will receive, on the Payment Date on or immediately following
the last day of the Funding Period, a prepayment of principal in an amount equal
to the amount remaining in the Pre-Funding Account (taking into account
applications to the purchase of any Subsequent Contracts on such Payment Date)
multiplied by the Class A Percentage and Class B Percentage, respectively. See
also "RISK FACTORS--REINVESTMENT RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS AND
COLLATERAL REINVESTMENT ACCOUNTS" in the Prospectus. It is anticipated that even
if the Seller originates sufficient Subsequent Contracts to exhaust most of the
Pre-Funded Amount, the principal amount of Subsequent Contracts conveyed to the
Trust by the end of the Funding Period will not be exactly equal to the amount
on deposit in the Pre-Funding Account and that therefore there will be at least
a nominal amount of principal prepaid to the Certificateholders at the end of
the Funding Period in any event.
12
<PAGE>
Following the transfer of Subsequent Contracts to the Trust, the aggregate
characteristics of the entire pool of Contracts may vary from those of the
Initial Contracts as of the Initial Cutoff Date, as to the criteria described in
"THE CONTRACTS" below.
RISKS ASSICIATED WITH NON-RECOURSE NATURE OF SECURITIES--NO RECOURSE TO THE
TRUST DEPOSITOR AND SELLER. Neither the Trust Depositor nor the Seller is
generally obligated to make any payments in respect of the Certificates or the
Contracts. However, in connection with each conveyance of Contracts by the
Seller to the Trust Depositor and by the Trust Depositor to the Trust, each of
the Seller and the Trust Depositor will make representations and warranties with
respect to the characteristics of such Contracts. In certain circumstances, the
Seller is obligated to repurchase Contracts with respect to which such
representations or warranties are not true as of the date made. Neither the
Seller nor the Trust Depositor is otherwise obligated with respect to the
Certificates (other than in respect of the transfer of Subsequent Contracts as
described herein). See also "RISK FACTORS--TRUST'S RELATIONSHIP TO EAGLEMARK,
THE TRUST DEPOSITORS, AND THEIR AFFILIATES" and "--RISKS ASSOCIATED WITH
NON-RECOURSE NATURE OF SECURITIES--NO RECOURSE TO THE COMPANY TRUST DEPOSITORS
OR THEIR AFFILIATES" and "RISKS ASSOCIATED WITH NON-RECOURSE NATURE OF THE
SECURITIES TRUSTS HAVE NO SIGNIFICANT ASSETS OR SOURCES OF FUNDS OTHER THAN THE
CONTRACTS" in the Prospectus.
SUBORDINATION; LIMITED ASSETS. The rights of the Class B Certificateholders
to receive payments in respect of the Class B Interest Distributable Amount on
any Payment Date are subordinated to the rights of the Class A
Certificateholders to receive payments in respect of the Class A Interest
Distributable Amount on such date, and the rights of the Class B
Certificateholders to receive payments in respect of the Class B Principal
Distributable Amount on any Payment Date are subordinated to the rights of the
Class A Certificateholders to receive payments in respect of the Class A
Interest Distributable Amount and the Class A Principal Distributable Amount for
such date. Consequently, on any Payment Date, Available Interest (after the
payment therefrom of any unreimbursed Advances to the Servicer, the Servicing
Fee, the Back-up Servicing Fee and the Trustee's Fee on such date) and monies on
deposit in the Reserve Fund will be applied to the payment of the Class A
Interest Distributable Amount before payment of the Class B Interest
Distributable Amount, and on any Payment Date, Available Principal (after the
payment therefrom of any unreimbursed Advances to the Servicer), Available
Interest (after the payment therefrom of any unreimbursed Advances to the
Servicer, the Servicing Fee, the Trustee's Fee, the Back-up Servicer Fee, the
Class A Interest Distributable Amount and the Class B Interest Distributable
Amount) and monies on deposit in the Reserve Fund will be applied to the payment
of the Class A Principal Distributable Amount before payment of the Class B
Principal Distributable Amount. In addition, on any Payment Date, amounts in
respect of the Class B Percentage of Available Principal may be distributed to
pay the Class A Interest Distributable Amount. If amounts otherwise allocable to
the Class B Certificates are used to fund payments of interest on or principal
of the Class A Certificates, distributions with respect to the Class B
Certificates may be delayed or reduced and Class B Certificateholders may suffer
a loss. See "DESCRIPTION OF THE CERTIFICATES--SUBORDINATION OF THE CLASS B
CERTIFICATES; RESERVE FUND."
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Contracts, its rights
against the Trust Depositor under the Deposit Agreement as secured by the
Pre-Funding Account and the Interest Reserve Account pledged by the Trust
Depositor under the Security Agreement, and the Reserve Fund. Holders of the
Certificates must rely for repayment upon payments on the Contracts and, if and
to the extent available, amounts on deposit in the Pre-Funding Account, the
Interest Reserve Account and the Reserve Fund. The Pre-Funding Account and the
Interest Reserve Account will only be available during the Funding Period. The
Pre-Funding Account will be used solely to purchase Subsequent Contracts and is
not available to cover losses on the Contracts. The Interest Reserve Account is
designed to cover obligations of the Trust relating to that portion of the
initial Certificate proceeds not invested in Contracts, and is not designed to
provide any protection against losses on the Contracts.
13
<PAGE>
LIMITED DELINQUENCY AND LOAN LOSS EXPERIENCE WITH MOTORCYCLE CONTRACTS. The
Seller/Servicer was organized in January 1993 and began purchasing and servicing
conditional sales contracts for Motorcycles in February 1993, and thus has
limited underwriting and servicing experience, delinquency experience and loan
loss and repossession experience with respect to the Contracts. Accordingly, and
for other reasons, the Seller's/Servicer's delinquency experience and loan loss
and repossession experience set forth under "THE CONTRACTS" may not be
indicative of the performance of the Contracts sold to the Trust Depositor and
held by the Trust. The Trust Depositor is a special purpose corporation
established for the limited purpose of purchasing the Contracts (and other
similar retail motorcycle conditional sales contracts) and related assets from
the Seller, and selling the same into the Trust (and other similar trusts); the
Trust Depositor was organized in [ ].
RISKS ASSOCIATED WITH GEOGRAPHIC CONCENTRATIONS OF CONTRACTS. [ ]% of the
aggregate principal balance of the Initial Contracts as of the Initial Cutoff
Date arise from loans to obligors in [ ]. [ ] may have negative
implications on repayment of the Contract including [ ].
See generally "RISK FACTORS--RISK OF UNPERFECTED SECURITY INTERESTS IN
FINANCED MOTORCYCLES" and "-- ADDITIONAL LEGAL LIMITS ON THE APPLICABLE
TRUSTEE'S ABILITY TO REALIZE ON ITS SECURITY INTEREST IN THE
MORTCYCLES--BANKRUPTCY LAWS" and "--ADDITIONAL LEGAL LIMITS ON THE APPLICABLE
TRUSTEE'S ABILITY TO REALIZE ON ITS SECURITY INTEREST IN THE
MOTORCYCLES--CONSUMER PROTECTION LAWS" in the Prospectus.
LIMITED LIQUIDITY. There is currently no secondary market for the
Certificates offered hereby. The Underwriter currently intends to make a market
in the Certificates, but it is under no obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the Certificateholders with liquidity of
investment or that it will continue for the life of the Certificates.
SELLER BANKRUPTCY CONSIDERATIONS. See generally "RISK FACTORS--COMPANY
BANKRUPTCY CONSIDERATIONS" in the Prospectus.
See generally "RISK FACTORS--PREPAYMENTS ON CONTRACTS AFFECT YIELD OF
SECURITIES" in the Prospectus.
The Class B Certificates will be subordinated to the Class A Certificates as
described herein. Accordingly, the yield on the Class B Certificates will be
extremely sensitive to the loss experience on the Contracts and the timing of
such losses. If the actual rate and amount of losses experienced on the
Contracts exceed the rate and amount of losses assumed by an investor, the yield
to maturity of the Class B Certificates may be lower than anticipated.
RISK ASSOCIATED WITH FAILURE OF OBLIGORS TO DESIGNATE PAYMENTS AS BEING
PAYMENTS ON THE CONTRACTS--JOINT ACCOUNTS. In certain circumstances, the
monthly billing statements relating to the Contracts and provided to the
Obligors also reflect the Obligors' outstanding "HARLEY CARD" monthly balance.
See "EAGLEMARK, INC.--GENERAL" below. With respect to such a joint billing
statement, the Obligor sends one payment which if not appropriately designated
by such Obligor in the statement returned with their payment will be allocated
first to the minimum payment due on the Harley Card. To the extent a payment is
insufficient to cover payment amounts due under both the Contract and the
minimum amount due on the Harley Card, the Contract will suffer the associated
shortfall.
STRUCTURE OF THE TRANSACTION
On the date of issuance of the Certificates, the Seller will sell, transfer,
assign, set over and otherwise convey the Initial Contracts and related assets
to the Trust Depositor, and the Trust Depositor will simultaneously establish
the Trust, and sell, transfer, assign, set over and otherwise convey to the
Trust all right, title and interest in such Initial Contracts and related
assets. Additionally, the Trust Depositor will deposit into the Pre-Funding
Account, the Pre-Funded Amount; into the Reserve Fund, the Reserve
14
<PAGE>
Fund Initial Deposit; and into the Interest Reserve Account, the amount required
to be deposited therein. On behalf of the Trust, as the issuer of the
Certificates offered hereby, the Trustee will, concurrently with such
conveyance, execute and deliver the Certificates to or upon the order of the
Trust Depositor. The Seller will continue to service the Contracts pursuant to
the Agreement, and will be compensated as Servicer.
The Trust will use funds on deposit in the Pre-Funding Account to acquire
Subsequent Contracts during the Funding Period as and to the extent described
herein. Any such acquisition of Subsequent Contracts is subject to the
availability thereof and to the satisfaction of the conditions described herein.
To the extent that amounts on deposit in the Pre-Funding Account have not been
fully applied to the purchase of Subsequent Contracts during the Funding Period,
the Class A Certificates and Class B Certificates will be prepaid in part,
without premium, on the Payment Date immediately following the last day of the
Funding Period in an amount equal to the amount then on deposit in the
Pre-Funding Account multiplied by the Class A Percentage and Class B Percentage,
respectively.
The Certificates will represent fractional undivided interests in the Trust,
the corpus of which will consist of the Initial Contracts and related assets
(including all rights to receive payments collected on such Contracts on or
after [ ], 199[ ], I.E., the Initial Cutoff Date, security interests in
the Motorcycles financed through such Contracts, and rights, if any, under
individual insurance policies with respect thereto); rights of the Trust against
the Trust Depositor under the Deposit Agreement; rights of the Trust in respect
of the collateral which the Trust Depositor has pledged under the Security
Agreement securing its obligations under the Deposit Agreement; any Subsequent
Contracts which the Trust Depositor conveys to the Trust in accordance with the
Deposit Agreement (including all rights to receive payments collected on such
Contracts on or after the applicable Subsequent Cutoff Date, related security
interests and insurance policy rights as described above); amounts held for the
Trust in the Collection Account (as defined below); and rights in the Interest
Reserve Account and Reserve Fund. The Certificates will be issued in
denominations of $1,000.
Payments and recoveries in respect of principal and interest on the
Contracts will be paid into a separate trust account maintained at the Trustee
in the name of the Trust (the "COLLECTION ACCOUNT"), no later than two Business
Days after receipt. Payments deposited in the Collection Account in respect of
each Due Period, net of certain fees and other amounts which the Trustee is
authorized to withdraw therefrom as described herein, will be applied on each
Payment Date to pay interest and principal to Certificateholders as and to the
extent described herein.
The Servicer is obligated to advance each month an amount equal to accrued
and unpaid interest on the Contracts which was delinquent with respect to the
related Due Period (subject to the limitations described below). The Servicer
will be entitled to reimbursement of such Advances by means of a first priority
withdrawal from the Collection Account of Available Funds. The Servicer will not
be required to make any such Advances to the extent that it does not expect to
recoup the Advance from such funds.
The Seller, as seller of the Contracts, will make certain representations
and warranties to the Trust Depositor with respect to the Contracts. Under the
Transfer and Sale Agreement, the Seller will agree that in the event of a breach
of any such representation and warranty made by the Seller that materially and
adversely affects the Trust's interest in any Contract (without regard to the
benefits of the Reserve Fund), the Seller will repurchase such Contract within
the time specified in the Transfer and S-6 Agreement at a price equal to (a) the
remaining Principal Balance of such Contract, plus (b) accrued and unpaid
interest at the Contract Rate on such Contract from the end of the Due Period
with respect to which the Obligor last made a payment through the end of the
immediately preceding Due Period (the "REPURCHASE PRICE").
15
<PAGE>
USE OF PROCEEDS
The Trust Depositor will use the net proceeds received from the sale of the
Certificates (i) for the purchase of the Initial Contracts and related assets
from the Seller, and (ii) the remainder for the funding of the Pre-Funding
Account held by the Collateral Agent under the Security Agreement. The Seller
will use the proceeds from the Trust Depositor's purchase of the Initial
Contracts, as well as Subsequent Contracts, for the repayment of a substantial
portion of the outstanding principal of the warehouse lines through which it
finances its motorcycle conditional sales contracts. Following each such
repayment, it is expected that the warehouse lines will be used to build a new
portfolio of Motorcycle conditional sales contracts.
THE CONTRACTS
Each Contract is (or will be, in the case of Subsequent Contracts) secured
by a Motorcycle (as described below) and is (or will be) a conditional sales
contract originated by a Harley-Davidson dealer and purchased by the Seller. No
Contract may be substituted by the Seller or the Trust Depositor with another
Motorcycle contract after such Contract has been sold by the Trust Depositor to
the Trust.
Each Contract (a) is (or will be) secured by a Motorcycle, (b) has (or will
have) a fixed annual percentage rate and provide for, if timely made, payments
of principal and interest which fully amortize the loan on a simple interest
basis over its term, (c) with respect to the Initial Contracts, has its last
scheduled payment due no later than [ ], and with respect to the Contracts as a
whole (including any Subsequent Contracts conveyed to the Trust after the
Closing Date), will have a last scheduled payment due no later than [ ], and
(d) with respect to the Initial Contracts, has its first scheduled payment due
no later than [ ]. The Contracts were (or will be) acquired by the Seller in
the ordinary course of the Seller's business. A detailed listing of the Initial
Contracts is appended to the Agreement. See "DESCRIPTION OF THE CERTIFICATES"
below. (For general composition of the Initial Contracts see Table 1 below).
Approximately [ ]% of the Principal Balance of the Initial Contracts as of the
Initial Cutoff Date is attributable to loans to purchase Motorcycles which were
new and approximately [ ]% is attributable to loans to purchase Motorcycles
which were used at the time the related Contract was originated. All Initial
Contracts have a contractual rate of interest of at least [ ]% per annum and
not more than [ ]% per annum and the weighted average contractual rate of
interest of the Initial Contracts as of the Initial Cutoff Date is approximately
[ ]% per annum (see Table 2 below). The Initial Contracts have remaining
maturities as of the Initial Cutoff Date of at least 6 months but not more than
[ ] months and original maturities of at least [ ] months but not more than
[ ]months (see Tables 3 and 4 below). The Initial Contracts had a weighted
average term to scheduled maturity, as of origination, of approximately
[ ]months, and a weighted average term to scheduled maturity as of the Initial
Cutoff Date of approximately [ ] months. The average principal balance per
Initial Contract as of the Initial Cutoff Date was approximately $[ ] and the
principal balances on the Initial Contracts as of the Initial Cutoff Date ranged
from $[ ] to $[ ] (see Table 5 below). The Contracts arise (or will arise) from
loans to Obligors located in 50 states and Washington D.C., and with respect to
the Initial Contracts, in the following approximate amounts expressed as a
percentage of the aggregate principal balances on the Initial Contracts as of
the Initial Cutoff Date: [ ]% in the state of [ ], [ ]% in [ ], [ ]% in
[ ], [ ]% in [ ], [ ]% in [ ], [ ]% in [ ], [ ]% in [ ], [ ]% in [ ],
and [ ]% in [ ] (see Table 6 below). No other state represented more than
[ ]% of the Initial Contracts.
Except for the criteria described in the preceding paragraph and under "RISK
FACTORS--THE CONTRACTS AND THE PRE-FUNDING ACCOUNT," there will be no required
characteristics of the Subsequent Contracts. Therefore, following the transfer
of the Subsequent Contracts to the Trust, the aggregate characteristics of the
entire pool of the Contracts, including the composition of the Contracts, the
distribution by APR of the Contracts, the distribution by calculated remaining
term of the Contracts, the distribution by original term to maturity of the
Contracts, the distribution by current balance of the
16
<PAGE>
Contracts, and the geographic distribution of the Contracts, described in the
following tables, may vary from those of the Initial Contracts as of the Initial
Cutoff Date.
The motorcycle dealer agreements between each of the originating dealers and
the Seller require the originating dealer to repurchase certain motorcycles
repossessed by the Seller in the event of a default by the Obligor ("DEALER
RECOURSE"); the Dealer Recourse will be assigned by the Seller to the Trust
Depositor pursuant to the Transfer and Sale Agreement and from the Trust
Depositor to the Trust pursuant to the Agreement. There can be no assurance that
an originating dealer will perform its Dealer Recourse obligations under such
motorcycle dealer agreements if and when required to do so.
TABLE 1
COMPOSITION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<S> <C>
Aggregate Principal Balance........................ $[ ]
Number of Contracts................................ [ ]
Average Principal Balance.......................... $[ ]
Weighted Average Annual Percentage Rate ("APR").... [ ]%
(Range)............................................ [ ]% to [ ]%
Weighted Average Original Term..................... [ ]
(Range)............................................ [ ] to [ ]
Weighted Average Calculated Remaining Term......... [ ]
(Range)............................................ [ ] to [ ]
</TABLE>
TABLE 2
DISTRIBUTION BY APR OF THE INITIAL CONTRACTS (as of the Initial Cutoff Date)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING
NUMBER OF NUMBER OF PRINCIPAL PERCENT OF
RATE CONTRACTS CONTRACTS BALANCE POOL BALANCE
- -------------------------------------------------------- -------------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
8.01-9.00% % $
9.01-10.00
10.01-11.00
11.01-12.00
12.01-13.00
13.01-14.00
14.01-15.00
15.01-16.00
16.01-17.00
Totals:................................................. 100.00%
</TABLE>
17
<PAGE>
TABLE 3
DISTRIBUTION BY CALCULATED REMAINING TERM
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
CALCULATED PERCENT OF OUTSTANDING
REMAINING NUMBER OF NUMBER OF PRINCIPAL PERCENT OF
TERM CONTRACTS CONTRACTS BALANCE POOL BALANCE
- -------------------------------------------------- ------------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
1-12 MONTHS....................................... %
13-24 MONTHS...................................... $ %
25-36 MONTHS......................................
37-48 MONTHS......................................
49-60 MONTHS......................................
61-72 MONTHS......................................
TOTALS:........................................... 100.00% 100.00%
</TABLE>
TABLE 4
DISTRIBUTION BY ORIGINAL TERM TO MATURITY
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING
ORIGINAL NUMBER OF NUMBER OF PRINCIPAL PERCENT OF
TERM CONTRACTS CONTRACTS BALANCE POOL BALANCE
- -------------------------------------------------- ------------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
1-12 MONTHS....................................... $ %
13-24 MONTHS...................................... $
25-36 MONTHS......................................
37-48 MONTHS......................................
49-60 MONTHS......................................
61-72 MONTHS......................................
TOTALS:........................................... 0 100.00% 100.00%
</TABLE>
18
<PAGE>
TABLE 5
DISTRIBUTION BY CURRENT BALANCE OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
OUTSTANDING
PERCENT OF PRINCIPAL PERCENT OF
CURRENT BALANCE NUMBER OF CONTRACTS NUMBER OF CONTRACTS BALANCE POOL BALANCE
- -------------------------------------- --------------------- --------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
$01-- $1,000....................... $ %
$1,001-- $1,500......................
$1,501-- $2,000......................
$2,001-- $2,500......................
$2,501-- $3,000......................
$3,001-- $3,500......................
$3,501-- $4,000......................
$4,001-- $4,500......................
$4,501-- $5,000......................
$5,001-- $5,500......................
$5,501-- $6,000......................
$6,001-- $6,500......................
$6,501-- $7,000......................
$7,001-- $7,500......................
$7,501-- $8,000......................
$8,001-- $8,500......................
$8,501-- $9,000......................
$9,001-- $9,500......................
$9,501--$10,000......................
$10,001--$10,500......................
$10,501--$11,000......................
$11,001--$11,500......................
$11,501--$12,000......................
$12,001--$12,500......................
$12,501--$13,000......................
$13,001--$14,000......................
$14,001--$15,000......................
$15,001--$16,000......................
$16,001--$17,000......................
$17,001--$18,000......................
$18,001--$19,000......................
$19,001--$20,000......................
$20,001--$22,000......................
$22,001--$24,000......................
$24,001--$26,000......................
$26,001--$28,000......................
$28,001--$30,000......................
$30,001--$32,000......................
totals: 100.00%
</TABLE>
19
<PAGE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
OUTSTANDING
PERCENT OF NUMBER OF PRINCIPAL PERCENT OF
STATE NUMBER OF CONTRACTS CONTRACTS BALANCE POOL BALANCE
- ------------------ --------------------- --------------------- ------------- -------------
<S> <C> <C> <C> <C>
Alabama $ %
Alaska............
Arizona...........
Arkansas..........
California........
Colorado..........
Connecticut.......
Delaware..........
District of
Columbia........
Florida...........
Georgia...........
Hawaii............
Idaho.............
Illinois..........
Indiana...........
Iowa..............
Kansas............
Kentucky..........
Louisiana.........
Maine.............
Maryland..........
Massachusetts.....
Michigan..........
Minnesota.........
Mississippi.......
Missouri..........
Montana...........
Nebraska..........
Nevada............
New Hampshire.....
New Jersey........
New Mexico........
New York..........
North Carolina....
North Dakota......
Ohio..............
Oklahoma..........
Oregon............
Pennsylvania......
Rhode Island......
</TABLE>
20
<PAGE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
OUTSTANDING
PERCENT OF NUMBER OF PRINCIPAL PERCENT OF
STATE NUMBER OF CONTRACTS CONTRACTS BALANCE POOL BALANCE
- ------------------ --------------------- --------------------- ------------- -------------
<S> <C> <C> <C> <C>
South Carolina....
South Dakota......
Tennessee.........
Texas.............
Utah..............
Vermont...........
Virginia..........
Washington........
West virginia.....
Wisconsin.........
Wyoming...........
Other.............
totals: 100.00%
</TABLE>
21
<PAGE>
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
The Seller was organized in January 1993 and is a one hundred percent owned
subsidiary of Eaglemark Financial Services, Inc., a Delaware corporation
("EAGLEMARK FINANCIAL"). The Seller began purchasing and servicing conditional
sales contracts for Motorcycles in February 1993. Accordingly, the Seller has
not accumulated a significant amount of delinquency and loss data on Motorcycle
conditional sales contracts similar to the Contracts. See "RISK FACTORS--LIMITED
EXPERIENCE WITH MOTORCYCLE CONTRACTS."
The following tables set forth the delinquency experience and loan loss and
repossession experience of the Seller's portfolio of conditional sales contracts
for Motorcycles since the Seller began purchasing and servicing such contracts.
These figures include data in respect of contracts which the Seller has
previously sold with respect to prior securitizations and for which the Seller
acts as servicer.
DELINQUENCY EXPERIENCE
(UNAUDITED)
(DOLLARS IN THOUSANDS)
AT
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 [199
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Number of Motorcycle conditional sales contracts
and associated outstanding principal dollar
balances(1)...................................
Period of delinquency and associated outstanding
principal balances(2).........................
30-59 Days......................................
60-89 Days......................................
90 Days or more.................................
Total number of delinquent Motorcycle
conditional sales contracts...................
Delinquent Motorcycle conditional sales
contracts as a percent of total number of
Motorcycle conditional sales contracts........
Aggregate principal balance of delinquent
Motorcycle conditional sales contracts........
Aggregate principal balance of delinquent
Motorcycle conditional sales contracts as a
percentage of the aggregate outstanding
principal balance of Motorcycle conditional
sales contracts...............................
</TABLE>
- ------------------------
(1) Excludes Contracts already in repossession, which Contracts the Servicer
does not consider outstanding.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month. Obligors do not receive initial statements until 60
22
<PAGE>
days after the origination of their contracts; therefore, the Obligors'
associated nonpayment is not considered for delinquency experience until
after the end of such 60-day period.
LOAN LOSS/REPOSSESSION EXPERIENCE
(UNAUDITED)
(ACTUAL DOLLARS)
<TABLE>
<CAPTION>
TWELVE MONTHS TWELVE MONTHS
ENDED TWELVE MONTHS ENDED
DECEMBER 31, ENDED DECEMBER DECEMBER 31, [THREE MONTHS
1994 31, 1995 1996 ENDED ]
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Principal Balance of all Motorcycle
conditional contracts serviced (1).........
Contract liquidations (2)....................
Net losses: Dollars(3).......................
Percentage(4)................................
</TABLE>
- ------------------------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of Contracts being serviced as of period
end, calculated on an annualized basis.
(3) The calculation of net loss includes actual charge-offs, deficiency balances
remaining after liquidation of repossessed vehicles, expenses of
repossession and liquidation, net of recoveries.
(4) As a percentage of the principal amount of contracts being serviced as of
period end, calculated on an annualized basis.
THE DATA PRESENTED IN THE FOREGOING TABLES ARE FOR ILLUSTRATIVE PURPOSES
ONLY AND THERE IS NO ASSURANCE THAT THE DELINQUENCY, LOAN LOSS OR REPOSSESSION
EXPERIENCE OF THE CONTRACTS WILL BE SIMILAR TO THAT SET FORTH ABOVE.
23
<PAGE>
HARLEY-DAVIDSON MOTORCYCLES
All of the motorcycles securing Contracts were manufactured by
Harley-Davidson, Inc., except not more than 2.5% of the Contracts (including all
Subsequent Contracts) relate to, and are secured by, motorcycles manufactured by
Buell. Buell produces "PERFORMANCE" motorcycles using engines and certain other
parts manufactured by Harley-Davidson. Harley-Davidson, as of December 31, 1996,
owned 49% of the voting equity of Buell.
Harley-Davidson produces and sells premium superheavyweight motorcycles.
Within the superheavyweight class, Harley-Davidson sells touring motorcycles
(equipped for long-distance touring), as well as motorcycles which emphasize the
distinctive styling associated with certain classic Harley-Davidson motorcycles.
Harley-Davidson motorcycles are based on variations of five basic chassis
designs and are powered by one of three air cooled, twin cylinder engines of "V"
configuration which have displacements of 883cc, 1200cc, and 1340cc.
Harley-Davidson manufactures its own engines and frames and is the only major
manufacturer of motorcycles in the United States.
Buell produces "PERFORMANCE" motorcycles using Harley-Davidson 1200cc
engines that are further modified in the manufacturing process, as well as
certain other Harley parts. The "PERFORMANCE" aspect of the motorcycles refers
to overall handling characteristics of the motorcycle, including cornering,
acceleration and braking. Buell motorcycles and related products are currently
distributed exclusively through Harley-Davidson dealers. Buell's overall share
of the "PERFORMANCE" market is negligible.
As of December 31, 1996, Eaglemark has originated Contracts with principal
balances outstanding equal to approximately $ which are related to, and
secured by, "touring cycles", and $ which are related to, and secured
by, "street legal" cycles. "Touring cycles" (with displacements typically over
750cc) are generally intended for use in long distance travel, and "street legal
cycles" include all other motorcycles which may be licensed for street use under
applicable state or local law and which are not generally viewed as falling with
the "touring cycle" category.
YIELD AND PREPAYMENT CONSIDERATIONS
By their terms, the Contracts may be prepaid, in whole or in part, at any
time and each Contract contains a provision which permits the Seller to require
full prepayment in the event of a sale of the Motorcycle securing a Contract. In
addition, repurchases of the Contracts by the Seller could occur in the event of
a breach of certain representations and warranties with respect to the Contracts
and upon exercise of the Seller's limited option to repurchase the Contracts
when the principal balance of the Certificates has decreased to a certain level.
Any prepayments and repurchases of Contracts will reduce the average life of the
Certificates and the interest received by the Certificateholders over the life
of the Certificates (for this purpose the term "PREPAYMENT" includes
liquidations due to default, as well as receipt of proceeds from credit life,
credit disability and casualty insurance policies). In addition, the occurrence
of a Special Distribution at or before the end of the Funding Period would have
the effect of reducing the interest received by Certificateholders over the life
of the Certificates.
The Class B Certificates will be subordinated to the Class A Certificates as
described herein. Accordingly, the yield on the Class B Certificates will be
extremely sensitive to the loss experience on the Contracts and the timing of
such losses. If the actual rate and amount of losses experienced on the
Contracts exceed the rate and amount of losses assumed by an investor, the yield
to maturity of the Class B Certificates may be lower than anticipated.
Although the contractual rates of interest on the Contracts vary,
disproportionate rates of principal prepayments between Contracts with higher
and lower contractual rates of interest will not affect the yield on the
Certificates if the Certificates are purchased at par because the contractual
rate of interest on each Contract is greater than the sum of the Class B
Pass-Through Rate, the Monthly Servicing Fee, the Back-up Servicing Fee and the
Trustee Fee.
24
<PAGE>
The final scheduled payment date on the Initial Contract with the latest
maturity is no later than []. The final scheduled payment date on the Contract
with the latest maturity among the Contracts as a whole, including any
Subsequent Contracts, will be not later than [ ].
EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC.
EAGLEMARK FINANCIAL SERVICES, INC.
Eaglemark Financial was formed in June 1992 with a capital infusion of
$10,000,000 from Harley-Davidson and an additional $15,000,000 capital
contribution from a major institutional investor in January 1993. In November
1995, Harley-Davidson purchased the equity owned by the major institutional
investor and as a result Eaglemark Financial is a 97% owned subsidiary of
Harley-Davidson. The business of Eaglemark Financial, through its 100% ownership
of Eaglemark, has been to provide wholesale and retail financing, credit card
and insurance services to dealers and customers of Harley-Davidson.
EAGLEMARK, INC.
Eaglemark is a Nevada corporation and is a wholly-owned subsidiary of
Eaglemark Financial. Eaglemark began operations in January 1993 when it
purchased the $85 million wholesale financing portfolio of certain
Harley-Davidson dealers from ITT Commercial Finance; subsequently, Eaglemark
entered the retail consumer finance business. Eaglemark provides financing to
Harley-Davidson customers for new and used motorcycles and Harley-Davidson
branded products including accessories through its private-label "HARLEY CARD,"
as well as a range of motorcycle insurance products through a wholly-owned
subsidiary. Eaglemark also finances extended service contracts on Motorcycles.
Eaglemark's financing, credit card and insurance programs are designed to work
together as a package that appeals to the needs of Harley-Davidson's customers.
The intent of such a package is to increase dealer and customer loyalty to
Eaglemark while improving revenue and profits over time. Eaglemark's principal
executive offices are located at 4150 Technology Way, Carson City, Nevada 89706
(telephone 702/885-1200). As of December 31, 1996, Eaglemark had total assets of
$339.9 million, and stockholder's equity of $50.9 million.
During the third quarter of 1994, Eaglemark began providing retail consumer
financing for other product lines. Initially, Eaglemark provided financing for
marine boat dealers under the trade names "MASTERCRAFT CREDIT," "WETJET CREDIT,"
"SKEETER CREDIT," "BOSTON WHALER FINANCIAL SERVICES," and "MARIAH FINANCIAL
SERVICES." Eaglemark has since added new lines of consumer financing including
(i) recreational vehicle financing through RV dealers under the trade name of
"HOLIDAY RAMBLER CREDIT"; (ii) Motorcycle financing through the Canadian
Harley-Davidson dealers transacted under the trade name "DEELEY CREDIT"; and
(iii) single-engine aircraft financing provided directly through Mooney Aircraft
under the trade name "MOONEY FINANCIAL SERVICES" or through a broker (Sterling
Air) under the Eaglemark name. Eaglemark also provides other forms of consumer
financing through various Dealers on a case-by-case basis. As of December 31,
1996, accounts receivable related to these new product lines represented less
than 23.9% of total retail receivables serviced by Eaglemark.
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
The Trust Depositor is a special purpose corporation incorporated in the
State of Nevada in [ ]. All of the common stock of the Trust Depositor is
owned by the Seller. All of the officers and directors of the Trust Depositor
are employed by the Seller, except that one director of the Trust Depositor is
required to be independent of the Seller. The Trust Depositor's business is
limited to purchasing the Contracts and related assets (and other similar retail
motorcycle installment conditional sales contracts) from the Seller, acting as
the settlor of the Trust and other similar trusts and performing the obligations
described
25
<PAGE>
in the Agreement and the Transfer and Sale Agreement (as well as similar
agreements entered into in connection with the formation of similar trusts).
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Agreement to be entered into
by the Trust Depositor, as originator of the Trust, the Servicer as the servicer
of the Contracts and Harris Trust and Savings Bank, as Trustee and as Back-up
Servicer. The Certificates will be issued in book-entry form only and will
represent fractional undivided interests in the Trust. The Certificates will be
issued in denominations of $1,000 in excess thereof, except for one Class A
Certificate with a denomination representing the remainder of the Class A
Initial Certificate Balance and one Class B Certificate with a denomination
representing the remainder of the Class B Initial Certificate Balance. The Trust
will consist of (among other things) the Contracts and the rights, benefits,
obligations and proceeds arising therefrom or in connection therewith, security
interests in the Motorcycles financed through the Contracts, proceeds from
certain insurance policies on individual Motorcycles, the Deposit Agreement,
rights under the Security Agreement securing the Trust Depositor's obligation
under the Deposit Agreement to purchase Subsequent Contracts and transfer the
same to the Trust through the pledge of monies on deposit in the Pre-Funding
Account, and amounts held for the Trust in the Collection Account.
Distributions of the Class A Interest Distributable Amount, the Class B
Interest Distributable Amount, the Class A Principal Distributable Amount, and
the Class B Principal Distributable Amount will be made by the Paying Agent
monthly on each Payment Date to persons in whose names the Class A Certificates
and Class B Certificates are registered as of the Record Date. The first Payment
Date for the Certificates will be [ ], 199[ ]. Payments will be made by
check mailed to such Certificateholder at the address appearing on the
Certificate Register; PROVIDED, HOWEVER, that a Certificateholder may request
payment by wire transfer pursuant to instructions delivered to the Trustee at
least ten (10) days prior to such Payment Date. Final payments of principal and
interest will be made only upon tender of the Certificates to the Paying Agent
for cancellation.
CONVEYANCE OF CONTRACTS
On the date of issuance of the Certificates, the Seller will sell, transfer,
assign, set over and otherwise convey the Initial Contracts and related assets
to the Trust Depositor, and the Trust Depositor will simultaneously establish
the Trust and sell, transfer, assign, set over and otherwise convey to the Trust
all right, title and interest in the Initial Contracts and related assets. On
behalf of the Trust, as the issuer of the Certificates offered hereby, the
Trustee will, concurrently with such conveyance, execute and deliver the
Certificates to or upon the order of the Trust Depositor. The Initial Contracts
will be described on a list delivered to the Trustee and certified by a duly
authorized officer of the Trust Depositor. Such list will include the amount of
monthly payments due on each Initial Contract as of the Initial Cutoff Date, the
contractual rate of interest on each Contract and the maturity date of each
Contract. Such list will be available for inspection by any Certificateholder at
the principal office of the Servicer. Prior to the conveyance of the Initial
Contracts to the Trust, the Servicer's compliance officer will have completed a
review of all the related Contract files, including the certificates of title
to, or other evidence of a perfected security interest in, the Motorcycles,
confirming the accuracy of the list of Initial Contracts delivered to the
Trustee. The Trust Depositor will deliver to the Trustee a report of a
nationally recognized independent public accounting firm which states that such
firm has performed specific procedures for a sample of the Initial Contracts
supplied by the Seller. Any Contract discovered not to agree with such list in a
manner that is materially adverse to the interests of the Certificateholders
will be required to be repurchased by the Seller, or, if the discrepancy relates
to the unpaid Principal Balance of a Contract, the Seller may deposit cash in
the Collection Account in an amount sufficient to offset such discrepancy.
26
<PAGE>
In addition to the Initial Contracts, the Trust property will include the
Trust's rights under the Deposit Agreement in respect of the Trust Depositor's
obligation to purchase from the Seller, and concurrently convey to the Trust,
Subsequent Contracts purchased as of the applicable Subsequent Cutoff Date (the
Initial Cutoff Date or any Subsequent Cutoff Date being individually referred to
herein as a "CUTOFF DATE"). Any conveyance of Subsequent Contracts on a
Subsequent Transfer Date will be subject to the satisfaction of the following
conditions, among others (computed, where applicable, based on the
characteristics of the Initial Contracts on the Initial Cutoff Date and any
Subsequent Contracts as of the related Subsequent Cutoff Date): (i) each such
Subsequent Contract satisfies the eligibility criteria specified in the Transfer
and Sale Agreement and the related Subsequent Purchase Agreement executed
thereunder; (ii) as of the applicable Subsequent Cutoff Date, no Contract in the
Trust, including the Subsequent Contracts that the Trust Depositor will be
conveying as of such Subsequent Cutoff Date, will have a scheduled maturity date
later than [ ]; (iii) the Trust Depositor shall have executed and
delivered in favor of the Trust a Subsequent Transfer Agreement conveying such
Subsequent Contracts to the Trust (including a schedule identifying such
Subsequent Contracts); (iv) the Trust Depositor shall have delivered certain
opinions of counsel to the Trustee, the Placement Agent and the Rating Agencies
with respect to the validity and other aspects of the conveyance of all such
Subsequent Contracts; and (v) the Rating Agencies shall have each notified the
Trust Depositor and the Trustee in writing that, following the addition of such
Subsequent Contracts, the Class A Certificates will be rated AAA by S&P and Aaa
by Moody's and the Class B Certificates will be rated [ ] by S&P and
[ ] by Moody's.
The Agreement will designate the Servicer as custodian to maintain
possession, as the Trustee's agent, of the Contracts and any other documents
relating to the Motorcycles. To facilitate servicing and save administrative
costs, the documents will not be segregated from other similar documents that
are in the Servicer's possession. Uniform Commercial Code financing statements
will be filed in Nevada and Illinois, reflecting the conveyance and assignment
of the Contracts to the Trust Depositor from the Seller and from the Trust
Depositor to the Trustee, and the Seller's and the Trust Depositor's accounting
records and computer systems will also reflect such conveyance and assignment.
In addition, each Contract will be stamped to reflect their conveyance and
assignment to the Trust. However, if, through fraud, negligence or otherwise, a
subsequent purchaser were able to take physical possession of the Contracts
without notice of such conveyance and assignment, the Trust's interest in the
Contracts could be defeated. In addition, certificates of title with respect to
the Motorcycles will not be amended to reflect the assignment of the Seller's
security interest in the Motorcycles to the Trust Depositor and the assignment
of the Trust Depositor's security interest in the Motorcycles to the Trust. In
the absence of amendments to the certificates of title, the Trust may not have a
perfected security interest in the Motorcycles. See "RISK FACTORS--RISK OF
UNPERFECTED SECURITY INTERESTS IN FINANCIAL MOTORCYCLES" in the Prospectus.
The Seller will make certain representations and warranties in the Transfer
and Sale Agreement with respect to each Contract, including that (references to
the Closing Date below being deemed, in respect of Subsequent Contracts, to
refer to the related Subsequent Transfer Date): (a) as of the related Cutoff
Date the most recent scheduled payment was made or was not delinquent more than
30 days and, to the best of the Seller's knowledge, all payments on the Contract
were made by the Obligor of the Contract; (b) as of the Closing Date no
provision of a Contract has been waived, altered or modified in any respect,
except by instruments or documents identified in the Contract File; (c) each
Contract is a genuine, legal, valid and binding obligation of the Obligor and is
enforceable in accordance with its terms (except as may be limited by laws
affecting creditors' rights generally); (d) as of the Closing Date no Contract
is subject to any right of rescission, set-off, counterclaim or defense, (e) as
of the Closing Date each Motorcycle securing a Contract is covered by certain
insurance policies described under "DESCRIPTION OF THE CERTIFICATES--INDIVIDUAL
MOTORCYCLE INSURANCE" below; (f) each Contract was originated by a Harley-
Davidson motorcycle dealer in the ordinary course of such dealer's business
which dealer had all necessary licenses and permits to originate the Contracts
in the state where such dealer was located,
27
<PAGE>
was fully and properly executed by the parties thereto and was sold by such
dealer to the Seller without any fraud or misrepresentation on the part of such
dealer; (g) no Contract was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer, sale and assignment of the
Contract pursuant to the Transfer and Sale Agreement or the Agreement or
pursuant to transfers of Certificates unlawful, void or voidable; (h) each
Contract and each sale of the related Motorcycle complies with all requirements
of any applicable federal, state or local law and regulations thereunder,
including, without limitation, usury, truth in lending, motor vehicle
installment loan and equal credit opportunity laws, with such compliance not
being affected by the Trust Depositor's or the Trust's ownership of the
Contracts and with the Seller to maintain in its possession, available for
inspection by or delivery to the Trust Depositor and the Trustee, evidence of
compliance with all such requirements; (i) as of the Closing Date no Contract
has been satisfied, subordinated in whole or in part or rescinded and the
Motorcycle securing the Contract has not been released from the lien of the
Contract in whole or in part; (j) each Contract creates a valid, subsisting and
enforceable first priority security interest in favor of the Seller in the
Motorcycle covered thereby, and such security interest has been conveyed and
assigned by the Seller to the Trust Depositor and the Trust Depositor to the
Trust and the original certificate of title, certificate of lien or other
notification (the "LIEN CERTIFICATE") issued by the body responsible for the
registration of, and the issuance of certificates of title relating to, motor
vehicles and liens thereon (the "REGISTRAR OF TITLES") of the applicable state
to a secured party which indicates the lien of the secured party on the
Motorcycle is recorded on the original certificate of title, and the original
certificate of title for each Motorcycle shows, or if a new or replacement Lien
Certificate is being applied for with respect to such Motorcycle the Lien
Certificate will be received within 180 days of the Closing Date and will show,
the Seller as original secured party under each Contract and as the holder of a
first priority security interest in such Motorcycle (and with respect to each
Contract for which the Lien Certificate has not yet been returned from the
Registrar of Titles, the Seller has received written evidence from the related
dealer that such Lien Certificate showing the Seller as lienholder has been
applied for), and the Seller's security interest has been validly assigned by
the Seller to the Trust Depositor and by the Trust Depositor to the Trustee
pursuant to this Agreement in order that immediately after the sale, each
Contract will be secured by an enforceable and perfected first priority security
interest in the Motorcycle in favor of the Trust as secured party, which
security interest is prior to all other liens upon and security interests in
such Motorcycle which now exist or may hereafter arise or be created (except, as
to priority, for any lien for taxes, labor, materials or any state law
enforcement agency affecting a Motorcycle which may arise after such sale); (k)
all parties to each Contract had capacity to execute such Contract; (l) no
Contract has been sold, conveyed and assigned or pledged to any other person
other than the Trust Depositor and the Trustee as transferee of the Trust
Depositor and prior to the transfer of the Contract to the Trust Depositor, the
Seller has good and marketable title to each Contract free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest, and as of
the Closing Date the Trustee will have a first priority perfected security
interest therein; (m) as of the related Cutoff Date there was no default,
breach, violation or event permitting acceleration under any Contract (except
for payment delinquencies permitted by clause (a) above), no event which with
notice and the expiration of any grace or cure period would constitute a
default, breach, violation or event permitting acceleration under such Contract,
and the Seller has not waived any of the foregoing; (n) as of the Closing Date
there are, to the best of the Seller's knowledge, no liens or claims which have
been filed for work, labor or materials affecting a motorcycle securing a
Contract, which are or may be liens prior or equal to the lien of the Contract;
(o) each Contract has a fixed rate of interest and provides for monthly payments
of principal and interest which, if timely made, would fully amortize the loan
on a simple interest basis over its term; (p) each Contract contains customary
and enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral of the benefits
of the security; (q) the description of each Contract set forth in the list
delivered to the Trustee is true and correct; and (r) there is only one original
of each Contract. The Seller will also make certain representations and
warranties with respect to the Contracts in the aggregate, including that (i)
the aggregate principal amount payable by the Obligors as of the Cutoff Date
equals the Initial Certificate Principal Balance (plus the Pre-Funded
28
<PAGE>
Amount as of the Closing Date), and each Initial Contract has a contractual rate
of interest of at least [ ]%, (ii) all motorcycles securing the Contracts
are Harley-Davidson or Buell motorcycles, (iii) approximately [ ]% of the
aggregate Principal Balance of the Initial Contracts is attributable to loans to
purchase new Motorcycles and approximately [ ]% of the aggregate Principal
Balance of the Initial Contracts is attributable to loans to purchase used
Motorcycles, (iv) no Initial Contract has a remaining maturity of more than
[ ]months, (v) the first payment under each Initial Contract is due on or
before[ ], 199[ ] and (vi) no adverse selection procedures were or will
be employed in selecting the Contracts from the Seller's portfolio.
Under the Transfer and Sale Agreement, the Seller will agree that in the
event of a breach of any such representations and warranties made by the Seller
that materially and adversely affects the Trustee's interest in any Contract the
Seller will repurchase such Contract within 90 days at the Repurchase Price (as
defined in "STRUCTURE OF THE TRANSACTION" above), unless such breach is cured.
Under the Agreement, the Trust Depositor will assign all of its right, title and
interest in such representations and warranties (including the Seller's
repurchase obligations) to the Trustee. The Trust Depositor will make no
representations and warranties with respect to the Contracts. The Seller is
selling the Contracts without recourse and, accordingly, will have no obligation
with respect to the Contracts other than pursuant to such representations,
warranties and repurchase obligations. The repurchase obligations of the Seller
described above will constitute the sole remedy against the Seller by the Trust
and the Certificateholders for a breach of any such representations and
warranties made by the Seller.
Pursuant to the Agreement, the Servicer will service and administer the
Contracts conveyed and assigned to the Trustee as more fully set forth below.
PAYMENTS ON CONTRACTS; AVAILABLE FUNDS, AVAILABLE INTEREST AND AVAILABLE
PRINCIPAL
The Trust Depositor, on behalf of the Trust, will establish and maintain the
Collection Account at the Trustee's office. The Collection Account must be
established and maintained as an "ELIGIBLE ACCOUNT", which is (i) a segregated
direct deposit account maintained with a depositary institution or trust company
organized under the laws of the United States of America or any of the States
thereof, or the District of Columbia, having a certificate of deposit,
short-term deposit or commercial paper rating of at least A-1 by S&P and P-1 by
Moody's. The Servicer may authorize the Trustee to invest the funds in the
Collection Account in Eligible Investments (as defined in the Agreement) that
will mature not later than one Business Day prior to the applicable Payment
Date. Such Eligible Investments include, among other investments, obligations of
the United States or of any agency thereof backed by the full faith and credit
of the United States, certificates of deposit, demand and time deposits and
bankers' acceptances sold by eligible depository institutions and trust
companies, certain repurchase agreements of United States government securities
with eligible commercial banks, corporate securities assigned the highest rating
by Moody's and S&P of which no investment in the securities of any one company
may exceed 10% of amounts in the Collection Account at the time of such
investment or pledge as security, and commercial paper assigned the highest
rating by Moody's and S&P. The Servicer is required to use its best efforts to
cause Obligors to make all payments on the Contracts directly to one or more
Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox Agreement.
The Servicer is required to deposit without deposit into any intervening
account into the Collection Account as promptly as possible, but in any case not
later than the second Business Day following the receipt thereof, all amounts
received on or in respect of the Contracts.
The "AVAILABLE FUNDS" for any Payment Date is an amount equal to the sum of
the Available Interest and the Available Principal for such Payment Date.
The Available Interest for a Payment Date will be equal to the total
(without duplication) of the following amounts received by the Servicer on or in
respect of the Contracts during the related Due
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Period: (i) all amounts received in respect of interest on the Contracts (as
well as late payment penalty fees and extension fees), (ii) the interest
component of all Net Liquidation Proceeds (as defined in the Agreement) with
respect to any Contract, (iii) the interest component of the aggregate of the
Repurchase Prices for Contracts repurchased by the Seller as the result of the
Seller's breach of representations and warranties, (iv) all Advances made by the
Servicer, (v) the interest component of all amounts paid by the Seller in
connection with an optional repurchase of the Contracts when the aggregate
outstanding Class A Certificate Balance and Class B Certificate Balance has
declined to less than 10% of the aggregate Class A Initial Certificate Balance
and Class B Initial Certificate Balance, (vi) all amounts received in respect of
Carrying Charges transferred from the Interest Reserve Account, and (vii) all
amounts received in respect of interest, dividends, gains, income and earnings
on investment of funds in the Trust Accounts.
The Available Principal for a Payment Date means the total (without
duplication) of the following amounts received by the Servicer on or in respect
of the Contracts during the related Due Period: (i) all amounts received in
respect of principal on the Contracts, (ii) the principal component of all Net
Liquidation Proceeds, (iii) the principal component of the aggregate of the
Repurchase Prices for Contracts repurchased by the Seller as the result of the
Seller's breach of certain representations and warranties, and (iv) the
principal component of all amounts paid by the Seller in connection with an
optional repurchase of the Contracts in the circumstance described above.
CALCULATION OF DISTRIBUTABLE AMOUNTS
The "CLASS A DISTRIBUTABLE AMOUNT" with respect to a Payment Date will equal
the sum of (a) the Class A Principal Distributable Amount (as defined in
"SUMMARY OF TERMS--MONTHLY PRINCIPAL DISTRIBUTIONS" above), and (b) the Class A
Interest Distributable Amount (as defined in "SUMMARY OF TERMS-- MONTHLY
INTEREST DISTRIBUTIONS" above) for such Payment Date.
The "CLASS B DISTRIBUTABLE AMOUNT" with respect to a Payment Date will equal
the sum of (a) the Class B Principal Distributable Amount (as defined in
"SUMMARY OF TERMS--MONTHLY PRINCIPAL DISTRIBUTIONS" above) and (b) the Class B
Interest Distributable Amount (as defined in "SUMMARY OF TERMS-- MONTHLY
INTEREST DISTRIBUTIONS" above) for such Payment Date.
DISTRIBUTIONS ON CERTIFICATES
On the fourth Business Day of each month (the "DETERMINATION DATE") the
Servicer will determine the following: (i) the amount of the Available Funds
with respect to the upcoming Payment Date occurring in such month, (ii)
Available Interest with respect to the upcoming Payment Date occurring in such
month, and (iii) Available Principal with respect to the upcoming Payment Date
occurring in such month.
On each Payment Date, the Trustee will distribute the following amounts in
the following order and priority:
(a) from the Special Distribution Subaccount, the amount of any
Mandatory Special Distribution, to be distributed (i) to the Class A
Certificateholders, in an amount equal to the Class A Percentage multiplied
by the amount in the Special Distribution Subaccount and (ii) to the Class B
Certificateholders, in an amount equal to the Class B Percentage multiplied
by the amount in the Special Distribution Subaccount, with the amounts in
the Special Distribution Subaccount being derived from draws on the
Pre-Funding Account (which amounts are available solely for payment of such
Special Distributions and not for any other purpose);
(b) from the Available Funds, reimbursement to the Servicer for Advances
previously made;
(c) from the Available Interest, the Servicing Fee to the Servicer;
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(d) from the Available Interest, the Trustee's Fee for the related Due
Period to the Trustee;
(e) from the Available Interest, the Back-up Servicer Fee for the
related Due Period to the Back-up Servicer;
(f) from the Available Interest, to the Class A Certificateholders of
record, an amount equal to the Class A Interest Distributable Amount
(including Class A Interest Carryover Shortfall) for such Payment Date and,
if such Available Interest is insufficient, the Class A Certificateholders
will receive such shortfall first, from the Class B Percentage of Available
Principal and second, if such amounts are still insufficient, from monies on
deposit in the Reserve Fund;
(g) from the Available Interest, to the Class B Certificateholders of
record, an amount equal to the Class B Interest Distributable Amount
(including Class B Interest Carryover Shortfall) for such Payment Date and,
if such Available Interest is insufficient, the Class B Certificateholders
will receive such shortfall from monies on deposit in the Reserve Fund;
(h) from the Available Principal, to the Class A Certificateholders of
record, an amount equal to the Class A Principal Distributable Amount
(including Class A Principal Carryover Shortfall) for such Payment Date and,
if such Available Principal is insufficient, the Class A Certificateholders
will receive such shortfall first, from Available Interest and second, if
such amounts are still insufficient, from monies on deposit in the Reserve
Fund;
(i) from the Available Principal, to the Class B Certificateholders of
record, an amount equal to the Class B Principal Distributable Amount
(including Class B Principal Carryover Shortfall) for such Payment Date and,
if such Available Principal is insufficient, the Class B Certificateholders
will receive such shortfall first, from Available Interest and second, if
such amounts are still insufficient, from monies on deposit in the Reserve
Fund; and
(j) any remaining Available Funds after the payments described in
clauses (a) through (i) above shall be transferred to the Reserve Agent for
deposit in the Reserve Account.
Distributions on each Payment Date will be made to holders of record of each
Class of Certificates on the related Record Date in an amount equal to the
product of the Fractional Interest (as defined herein) represented by the
Certificates of such Class held by such Certificateholders on such Record Date
and the aggregate amounts distributed in respect of the Certificates of such
Class on such Payment Date. The "FRACTIONAL INTEREST" represented by the
Certificates of a Class held by a Certificateholder on any date equals the
percentage obtained by dividing (i) the principal balance of all Certificates of
such Class held by such Certificateholder on such date by (ii) the aggregate of
the principal balances of all of the Certificates of such Class held by all
Certificateholders on such date.
Subordination of the Class B Certificates; Reserve Fund; Interest Reserve
Account
SUBORDINATION. The rights of the Class B Certificateholders to receive
payments in respect of the Class B Interest Distributable Amount on any Payment
Date are subordinated to the rights of the Class A Certificateholders to receive
payments in respect of the Class A Interest Distributable Amount on such date,
and the rights of the Class B Certificateholders to receive payments in respect
of the Class B Principal Distributable Amount on any Payment Date are
subordinated to the rights of the Class A Certificateholders to receive payments
in respect of the Class A Interest Distributable Amount and the Class A
Principal Distributable Amount for such date. Consequently, on any Payment Date,
Available Interest (after the payment therefrom of any unreimbursed Advances to
the Servicer, the Servicing Fee, the Back-up Servicing Fee and the Trustee's Fee
on such date) and monies on deposit in the Reserve Fund will be applied to the
payment of the Class A Interest Distributable Amount before payment of the Class
B Interest Distributable Amount, and on any Payment Date, Available Principal
(after the payment therefrom of any unreimbursed Advances to the Servicer),
Available Interest (after the payment therefrom of any unreimbursed Advances to
the Servicer, the Servicing Fee, the Trustee's Fee, the Back-up
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Servicing Fee, the Class A Interest Distributable Amount and the Class B
Interest Distributable Amount) and monies on deposit in the Reserve Fund will be
applied to the payment of the Class A Principal Distributable Amount before
payment of the Class B Principal Distributable Amount. In addition, on any
Payment Date, amounts in respect of the Class B Percentage of Available
Principal may be distributed to pay the Class A Interest Distributable Amount.
If amounts otherwise allocable to the Class B Certificates are used to fund
payments of interest on or principal of the Class A Certificates, distributions
with respect to the Class B Certificates may be delayed or reduced and Class B
Certificateholders may suffer a loss.
The Certificateholders will have the benefit of the Reserve Fund. The
Reserve Fund will not be a part of or otherwise includible in the Trust and will
be a segregated trust account held by the Reserve Agent for the benefit of the
Trustee. Any amounts held on deposit in the Reserve Fund and any investment
earnings thereon are owned by, and will be taxable to, the Trust Depositor for
federal income tax purposes. The Reserve Fund will be created with an initial
deposit by the Trust Depositor of an amount equal to [ ]% of the Principal
Balance of the Initial Contracts ($ ) in the Trust and will thereafter be
funded on each Payment Date by the deposit therein of certain monies pursuant to
the Agreement, until the monies in the Reserve Fund reach an amount equal to the
Reserve Fund Requisite Amount (as hereinafter defined). Thereafter, on each
Payment Date on which amounts held in the Reserve Fund (after giving effect to
any required withdrawals therefrom on such date) exceed the Reserve Fund
Requisite Amount such amounts shall be released to the Trust Depositor and the
Trustee's lien thereon shall be released.
The "RESERVE FUND REQUISITE AMOUNT" with respect to any Payment Date will be
an amount equal to [ ]% of the Principal Balance of the Contracts in the
Trust as of the first day of the immediately preceding Due Period; provided,
however, in the event a Reserve Fund Trigger Event (as defined herein) occurs
with respect to a Payment Date and has not terminated for three consecutive
Payment Dates (inclusive of the respective Payment Date), the Reserve Fund
Requisite Amount shall be equal to [ ]% of the Principal Balance of the
Contracts in the Trust as of the first day of the immediately preceding Due
Period. Notwithstanding the foregoing, after the Funding Period, in no event
shall the Reserve Fund Requisite Amount be less than [ ]% of the aggregate
of the Initial Class A Certificate Balance and Initial Class B Certificate
Balance. As of any Payment Date, the amount of funds actually on deposit in the
Reserve Fund may, in certain circumstances, be less than the Reserve Fund
Requisite Amount.
A "RESERVE FUND TRIGGER EVENT" will have been deemed to occur with respect
to any Payment Date if (i) the Average Delinquency Ratio (as defined herein) for
such Payment Date is equal to or greater than [ ]%; (ii) the Average Loss
Ratio (as defined herein) for such Payment Date is equal to or greater than
[ ]%, (iii) the Cumulative Loss Ratio (as defined herein) for such Payment
Date is equal to or greater than (a) [ ]% with respect to any Payment Date
which occurs within the period from the Closing Date to, and inclusive of, the
first anniversary of the Closing Date, (b) [ ]% with respect to any
Payment Date which occurs within the period from the day after the first
anniversary of the Closing Date to, and inclusive of, the second anniversary of
the Closing Date, or (c) [ ]% for any Payment Date following the second
anniversary of the Closing Date or (iv) the Average Default Ratio for such
Payment Date is equal to or greater than [ ]%. The "AVERAGE DELINQUENCY
RATIO" for any Payment Date is equal to the arithmetic average of the
Delinquency Ratios for the Payment Date and the two immediately preceding
Payment Dates and the Delinquency Ratio for any Payment Date is equal to the
fraction (expressed as a percentage) derived by dividing (a) the Delinquency
Amount during the immediately preceding Due Period multiplied by twelve by (b)
the Principal Balance of the Contracts as of the beginning of the related Due
Period. The "DELINQUENCY AMOUNT" as of any Payment Date means the Principal
Balance of all Contracts that were delinquent 60 days or more as of the end of
the related Due Period (including Contracts in respect of which the related
Motorcycles have been repossessed and are still inventory). The "AVERAGE LOSS
RATIO" for any Payment Date is equal to the arithmetic average of the Loss
Ratios for such Payment Date and the two immediately preceding Payment Dates and
the Loss
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Ratio for any Payment Date is equal to the fraction (expressed as a percentage)
derived by dividing (x) the Net Liquidation Losses for all Contracts that became
Liquidated Contracts during the immediately preceding Due Period multiplied by
twelve by (y) the outstanding Principal Balances of all Contracts as of the
beginning of the related Due Period. "NET LIQUIDATION LOSSES" means, with
respect to a Liquidated Contract, the amount, if any, by which (a) the
outstanding Principal Balance of such Liquidated Contract plus accrued and
unpaid interest thereon at the Contract Rate to the date on which such
Liquidated Contract became a Liquidated Contract exceeds (b) the Net Liquidation
Proceeds for such Liquidated Contract. "NET LIQUIDATION PROCEEDS" means, as to
any Liquidated Contract, the proceeds realized on the sale or other disposition
of the related Motorcycle, including proceeds realized on the repurchase of such
Motorcycle by the originating dealer for breach of warranties, and the proceeds
of any insurance relating to such Motorcycle, after payment of all expenses
incurred thereby, together, in all instances, with the expected or actual
proceeds of any recourse rights relating to such Contract as well as any post
disposition proceeds received by the Servicer. "LIQUIDATED CONTRACT" means any
defaulted Contract as to which the Servicer has determined that all amounts
which it expects to recover from or on account of such Contract have been
recovered; provided that any defaulted Contract in respect of which the related
Motorcycle has been realized upon and disposed of and the proceeds of such
disposition have been realized shall be deemed to be a Liquidated Contract; and
provided further, a Contract which has been repossessed and has not been sold by
the Servicer for a period in excess of 90 days from such date of repossession or
a Contract which has been delinquent more than 150 days shall be deemed to be a
Liquidated Contract with a zero balance. The "CUMULATIVE LOSS RATIO" for any
Payment Date means the fraction (expressed as a percentage) computed by the
Servicer by dividing (a) the aggregate Net Liquidation Losses for all Contracts
since the Cutoff Date through the end of the related Due Period by (b) the sum
of (i) the Principal Balance of the Contracts as of the Cutoff Date plus (B) the
Principal Balance of any Subsequent Contracts as of the related Subsequent
Cutoff Date. The "AVERAGE DEFAULT RATIO" for any Payment Date is equal to the
arithmetic average of the Default Ratio for such Payment Date and the two
immediately preceding Payment Dates and the Default Ratio for any Payment Date
is equal to the fraction (expressed as a percentage) derived by dividing (x) the
Principal Balance for all Contracts that become Defaulted Contracts during the
immediately preceding Due Period multiplied by twelve by (y) the outstanding
Principal Balances of all Contracts as of the beginning of the related Due
Period. A "DEFAULTED CONTRACT" means a Contract with respect to which there has
occurred one or more of the following: (i) all or some portion of any payment
under the Contract is 120 days or more delinquent, (ii) repossession (and
expiration of any redemption period) of a Motorcycle securing a Contract, or
(iii) the Servicer has determined in good faith that an Obligor is not likely to
resume payment under a Contract. A Trigger Event will be deemed to have
terminated with respect to a Payment Date if no Trigger Event shall exist with
respect to three consecutive Payment Dates (inclusive of the respective Payment
Date).
The Servicer may, from time to time after the date of this Prospectus
Supplement, request each Rating Agency to approve a formula for determining the
Reserve Fund Requisite Amount that is different from those described above and
would result in a decrease in the Reserve Fund Requisite Amount or the manner by
which the Reserve Fund is funded. If each Rating Agency delivers a letter to the
Trustee to the effect that the use of any such new formulation will not result
in a qualification, reduction or withdrawal of its then-current rating of the
Class A Certificates and the Class B Certificates, then the Reserve Fund
Requisite Amount will be determined in accordance with such new formula. The
Agreement will accordingly be amended, without the consent of any
Certificateholder, to reflect such new calculation.
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of the Certificateholders. Funds on deposit in the Reserve Fund
may be invested in Reserve Fund Permitted Investments (as defined in the
Agreement). Investment income on monies on deposit in the Reserve Fund will not
be available for distribution to Certificateholders or otherwise subject to any
claims or rights of the Certificateholders and will be paid to the Trust
Depositor. Any loss on such investments will be charged to the Reserve Fund.
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If on any Payment Date the Class B Certificate Balance equals zero and
amounts on deposit in the Reserve Fund have been depleted as a result of losses
in respect of the Contracts, the protection afforded to the Class A
Certificateholders by the subordination of the Class B Certificates and by the
Reserve Fund will be exhausted and the Class A Certificateholders will bear
directly the risks associated with ownership of the Contracts.
Neither the Class B Certificateholders, the Seller nor the Servicer will be
required to refund any amounts properly distributed or paid to them, whether or
not there are sufficient funds on any subsequent Payment Date to make full
distributions to the Class A Certificateholders.
The Trust Depositor has established, and funded with an initial deposit on
the Closing Date, the Interest Reserve Account for the purpose of providing
additional funds (by payment to the Trust of Carrying Charges as described
below) to pay certain distributions on Payment Dates occurring during (and on
the first Payment Date following the end of) the Funding Period. In addition to
the initial deposit, all investment earnings with respect to the Pre-Funded
Amount are to be deposited into the Interest Reserve Account and, pursuant to
the Deposit Agreement, the Trust Depositor is obligated to pay to the Trust, on
each Payment Date described above, Carrying Charges from such account. The
Interest Reserve Account has been established to account for the fact that a
portion of the proceeds obtained from the sale of Certificates will be initially
deposited in the Pre-Funding Account (as the initial Pre-Funded Amount) rather
than invested in Contracts, and the monthly investment earnings on such Pre-
Funded Amount (until the Pre-Funded Amount is used to purchase Subsequent
Contracts) are expected to be less than the Class A Pass-Through Rate and Class
B Pass-Through Rate, with respect to the corresponding portion of the Class A
Certificate Balance and Class B Certificate Balance. The Interest Reserve
Account is not designed to provide any protection against losses on the
Contracts in the Trust. The Interest Reserve Account will not be a part of or
otherwise includible in the Trust and will be a segregated trust account held by
the Trust Depositor for the benefit of the Trustee. Any amounts held on deposit
in the Interest Reserve Account and any investment earnings thereon are owned
by, and will be taxable to, the Trust Depositor for federal income tax purposes.
After the Funding Period, money in the Interest Reserve Account will be released
to the Trust Depositor free and clear of the lien of the Security Agreement.
ADVANCES
The Servicer is obligated to advance each month an amount equal to accrued
and unpaid interest on the Contracts which was delinquent with respect to the
related Due Period, but only to the extent that the Servicer believes that the
amount of such Advance will be recoverable from collections on the Contracts.
The Servicer will deposit any Advances in the Collection Account no later than
the Determination Date. The Servicer will be entitled to recoup Advances on a
Contract by means of a first priority withdrawal from Available Funds on any
Payment Date.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution to Certificateholders pursuant to
Article VIII of the Agreement, the Trustee, in its capacity as Certificate
Registrar and Paying Agent, shall cause to be mailed to each Certificateholder,
at the address appearing in the Certificate Register, a statement as of the
related Payment Date prepared by the Servicer setting forth:
(i) the amount distributed on such date and allocable to principal of
the Class A Certificates and Class B Certificates;
(ii) the amount distributed on such date and allocable to interest on
the Class A Certificates and Class B Certificates;
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(iii) the amount of the Class A and Class B Principal and Interest
Carryover Shortfalls, if any, on such Payment Date and the change in the
Class A and Class B Principal and Interest Carryover Shortfalls from the
immediately preceding Payment Date;
(iv) the amount otherwise distributable to the Class B
Certificateholders that is instead distributed to the Class A
Certificateholders on such Payment Date;
(v) the amount of the distributions described in (i) or (ii) above
payable pursuant to a claim on the Reserve Fund or from any other source not
constituting Available Funds and the amount remaining in the Reserve Fund
after giving effect to all deposits and withdrawals from the Reserve Fund on
such date;
(vi) the amount of any Special Distribution to be made on such Payment
Date;
(vii) for each Payment Date during the Funding Period, the remaining
Pre-Funded Amount;
(viii) for each Payment Date during the Funding Period to and including
the Payment Date immediately following the end of the Funding Period, the
Principal Balance and number of Subsequent Contracts conveyed to the Trust
during the related Due Period;
(ix) the remaining Class A Certificate Balance and Class B Certificate
Balance after giving effect to the distribution of principal (and Special
Distribution, if any) to be made on such Payment Date;
(x) the Pool Balance as of the close of business on the last day of the
related Due Period;
(xi) the Class A Pool Factor and the Class B Pool Factor immediately
before and immediately after such Payment Date;
(xii) the amount of fees payable out of the Trust, separately identifying
the Monthly Servicing Fee, the Trustee Fee and the Back-up Servicer Fee;
(xiii) the number and aggregate Principal Balance of Contracts
delinquent, 31-59 days, 60-89 days and 90 or more days, computed as of the
end of the related Due Period;
(xiv) the number and aggregate Principal Balance of Contracts that became
Liquidated Contracts during the immediately preceding Due Period, the amount
of liquidation proceeds for such Due Period, the amount of liquidation
expenses being deducted from liquidation proceeds for such Due Period, the
Net Liquidation Proceeds and the Net Liquidation Losses for such Due Period;
(xv) the Loss Ratio, the Average Loss Ratio, the Cumulative Loss Ratio,
the Delinquency Ratio, the Average Delinquency Ratio, the Default Ratio and
the Average Default Ratio as of such Payment Date;
(xvi) the number of Contracts and the aggregate Principal Balance of such
Contracts, as of the first day of the Due Period relating to such Payment
Date (after giving effect to payments received during such Due Period and to
any transfers of Subsequent Contracts to the Trust occurring on or prior to
such Payment Date);
(xvii) the aggregate Principal Balance and number of Contracts that were
repurchased by the Seller pursuant to the Agreement with respect to the
related Due Period, identifying such Contracts and the Repurchase Price for
such Contracts; and
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(xviii) such other customary factual information as is available to the
Servicer as the Servicer deems necessary and can reasonably obtain from its
existing data base to enable Certificateholders to prepare their tax return.
Within 75 days after the end of each calendar year, the Certificate
Registrar shall mail to each Certificateholder of record at any time during such
calendar year a report as to the aggregate amounts reported pursuant to
subsections (a)(i), (ii), and (xii) described above attributable to such
Certificateholder and such other information as is reasonably necessary for the
preparation of such Certificateholder's income tax return in respect of the
Certificates for such calendar year.
ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER
The Servicer will deliver to the Trustee, Moody's and S&P on or before
January 31 of each year commencing January 31, 199[ ], an officer's certificate
stating that (a) a review of its activities during the prior calendar year and
of its performance under the Agreement was made under the supervision of the
officer signing such certificate and (b) to such officer's knowledge, based on
such review, the Servicer has fully performed all its obligations under the
Agreement throughout such period, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate may be
obtained by any Certificateholder by a request in writing to the Trustee
addressed as follows: 311 West Monroe Street, 12th Floor, Chicago, Illinois
60606, Attention: Indenture Trust Division.
REPURCHASE OPTION
The Agreement will provide that on any Payment Date on which the aggregate
of the Class A and Class B Certificate Balance is less than 10% of the Class A
and Class B Initial Certificate Principal Balance, the Seller will have the
option to repurchase, on 20 days' prior written notice to the Trustee, all
outstanding Contracts at a price equal to the Class A and Class B Certificate
Balance on the prior Payment Date plus the aggregate of the Class A Interest
Distributable Amount and the Class B Interest Distributable Amount for the
current Payment Date as well as the accrued and unpaid Monthly Servicing Fee,
Trustee Fee, Back-up Servicer Fee and unreimbursed Advances to the date of such
repurchase. Such repurchase will effect an early termination of the Trust. The
Trustee shall send written notice to each Certificateholder of the Seller's
intention to repurchase such Contracts within five Business Days of the
Trustee's receipt of written notice from the Seller of the Seller's intention.
MANDATORY SPECIAL DISTRIBUTIONS
The Class A Certificates and Class B Certificates will be prepaid in part
pursuant to a Mandatory Special Distribution, without premium, on the Payment
Date on or immediately following the last day of the Funding Period in the event
that any amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Contracts, including any such purchase
on such date. The aggregate principal amount of Class A Certificates and Class B
Certificates to be prepaid will be an amount equal to the amount then on deposit
in the Pre-Funding Account multiplied by the Class A Percentage and Class B
Percentage, respectively.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will manage, administer, service and make collections on the
Contracts exercising the degree of skill and care consistent with the highest
degree of skill and care that the Servicer exercises with respect to similar
contracts serviced by the Servicer and in any event with no less degree of skill
and care than would be exercised by a prudent servicer of motorcycle conditional
sales contracts.
The Servicer may, consistent with its customary servicing procedures, grant
to the Obligor on any Contract an extension of payments due under such Contract,
PROVIDED that (i) the extension period is
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limited to 45 days, (ii) and the Obligor has been in good standing for the
previous twelve-month period, (iii) such extension is consistent with the
Servicer's customary servicing procedures and with the Agreement, (iv) such
extension does not extend the maturity date of the Contract beyond the last
maturity date of any of the Contracts as of the Initial Cutoff Date (or as of
the last Subsequent Cutoff Date, if any) and (v) the aggregate Principal
Balances of Contracts which have had extensions granted does not exceed more
than [ %] of the aggregate of the Class A Initial Certificate Principal
Balance and the Class B Initial Certificate Principal Balance.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer will be entitled to receive a Monthly Servicing Fee for each
Due Period (to be paid on the related Payment Date) equal to [ ] of
[ %] of the Principal Balance of the Contracts as of the beginning of such
Due Period. Along with the Monthly Servicing Fee, and included as part of the
"SERVICING FEE" as defined in the Agreement, the Servicer will be entitled to
receive late payment penalty fees and extension fee paid by Obligors during the
related Due Period as additional compensation. Such Servicing Fee is payable
from Available Interest prior to the payment from such Available Interest of
interest and/or principal on the Certificates. See "DESCRIPTION OF THE
CERTIFICATES--DISTRIBUTIONS ON CERTIFICATES" above.
The Servicing Fee provides compensation for customary third-party servicing
activities to be performed by the Servicer for the Trust, for additional
administrative services performed by the Servicer on behalf of the Trust and for
expenses paid by the Servicer on behalf of the Trust.
Customary servicing activities include collecting and recording payments,
communicating with Obligors, investigating payment delinquencies, providing
billing and tax records to Obligors and maintaining internal records with
respect to each Contract. Administrative services performed by the Servicer on
behalf of the Trust include selecting and packaging the Contracts, calculating
distributions to Certificateholders and providing related data processing and
reporting services for Certificateholders and on behalf of the Trustee. Expenses
incurred in connection with servicing of the Contracts and paid by the Servicer
from its servicing fees include payment of fees and expenses of accountants,
payments of all fees and expenses incurred in connection with the enforcement of
Contracts, and payment of expenses incurred in connection with distributions and
reports to Certificateholders.
INDIVIDUAL MOTORCYCLE INSURANCE
The terms of each Contract require that for the life of the Contract, each
Motorcycle is covered by a collision and comprehensive or equivalent insurance
policy which covers physical damage risks, provides limited insurance coverage
for damage to the Motorcycle and names the Seller as a loss payee. The amount of
insurance coverage is limited to the value of the Motorcycle. In the Transfer
and Sale Agreement, the Seller has warranted that all premium payments on such
insurance have been paid in full for one year from the date of the Contracts'
origination. Pursuant to Contract terms, the Servicer may "FORCE PLACE"
collision and comprehensive insurance with respect to the related Motorcycle in
those situations in which the Obligor has not maintained the required insurance.
Currently, the Servicer utilizes Recreational Products Insurance Division, a
division of Universal Underwriters Insurance Company, to "FORCE PLACE"
comprehensive and collision insurance in 31 states in which Obligors reside. As
conveyee and assignee of the Contracts, the Trust will be entitled to the
benefits of such insurance. See "DESCRIPTION OF THE CERTIFICATES--CONVEYANCE OF
CONTRACTS." Following repossession of a Motorcycle by the Servicer, the Servicer
does not maintain such insurance. In the event the Servicer repossesses a
Motorcycle on behalf of the Trust, the Servicer will act as self-insurer for any
damage to such Motorcycle until it is resold.
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EVIDENCE AS TO COMPLIANCE
On or before March 31 of each year, beginning on March 31, 199[ ], the
Servicer will deliver to the Trustee and each Rating Agency a report of a
nationally recognized accounting firm, with respect to the twelve months ended
the immediately preceding December 31, a statement (the "ACCOUNTANT'S REPORT")
addressed to the Board of Directors of the Servicer and to the Trustee to the
effect that such firm has audited the consolidated financial statements of
Eaglemark Financial and issued its report thereon and that such audit (1) was
made in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances; (2) included an
examination of documents and records relating to the servicing of motorcycle
conditional sales contracts under pooling and servicing agreements substantially
similar one to another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby, including
the Agreement); (3) included an examination of the delinquency and loss
statistics relating to the portfolio of motorcycle conditional sales contracts
of Eaglemark Financial and its subsidiaries; and (4) except as described in the
statement, disclosed no exceptions or errors in the records relating to
motorcycle loans serviced for others that, in the firm's opinion, generally
accepted auditing standards requires such firm to report. The Accountant's
Report will further state that (1) a review in accordance with agreed upon
procedures was made of one randomly selected Monthly Report and (2) except as
disclosed in the Accountant's Report, no exceptions or errors in the Monthly
Report so examined were found.
The Agreement provides that the Servicer shall furnish to the Trustee, S&P
and Moody's such underlying data as each may reasonably request.
CERTAIN MATTERS RELATING TO THE SERVICER
The Agreement provides that the Servicer may not resign from its obligations
and duties as servicer thereunder, except upon a determination that the
Servicer's performance of such duties is no longer permissible under the
Agreement or applicable law, and will prohibit the Servicer from extending
credit to any Certificateholder for the purchase of a Certificate, purchasing
Certificates in any agency or trustee capacity or, except as provided in the
Agreement, lending money to the Trust.
EVENTS OF TERMINATION
An "EVENT OF TERMINATION" under the Agreement will occur if (a) either the
Servicer or the Seller fails to make any payment or deposit required under the
Certificates, the Agreement or the Transfer and Sale Agreement and such failure
continues for four Business Days after the date on which such payment or deposit
was due; (b) either the Servicer or the Seller fails to observe or perform in
any material respect any covenant or agreement in the Certificates, the
Agreement or the Transfer and Sale Agreement which continues unremedied for
thirty days after the date on which such failure commences; (c) either the
Servicer or the Seller assigns its duties or rights under the Agreement or the
Transfer and Sale Agreement, except as specifically permitted under the
Agreement or the Transfer and Sale Agreement, or attempts to make such an
assignment; (d) a court having jurisdiction in the premises enters a decree or
order for relief in respect of the Servicer or Trust Depositor in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoints a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Servicer, or Trust
Depositor, or for any substantial liquidation of their respective affairs; (e)
the Servicer or Trust Depositor commences a voluntary case under any applicable
bankruptcy, insolvency or similar law, or consents to the entry of an order for
relief in an involuntary case under any such law, or consents to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of the Servicer or Trust Depositor
or for any substantial part of its property or shall have made any general
assignment for the benefit of creditors, or fails to, or admits in writing its
inability to, pay debts as they become due, or takes any corporate action in
furtherance of the foregoing; (f) the failure of the
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Servicer to deliver the Monthly Report pursuant to the terms of the Agreement
and such failure remains uncured for five business days after the date on which
such failure commences; or (g) any representation, warranty or statement of the
Servicer made in the Agreement or any certificate, report or other writing
delivered pursuant thereto shall prove to be incorrect in any material respect
as of the time when the same shall have been made and the incorrectness of such
representation, warranty or statement has a material adverse effect on the Trust
and, within 30 days after written notice thereof shall have been given to the
Servicer or the Trust Depositor by the Trustee, the circumstances or condition
in respect of which such representation, warranty or statement was incorrect
shall not have been eliminated or otherwise cured. The Servicer will be required
under the Agreement to give the Trustee, Moody's, S&P, the Back-up Servicer and
the Certificateholders notice of an Event of Termination promptly upon the
occurrence of such Event.
RIGHTS UPON AN EVENT OF TERMINATION
If an Event of Termination has occurred and is continuing, (a) the Trustee
or (b) the holders of Certificates with aggregate Fractional Interests
evidencing 25% or more of the Trust may terminate all of the Servicer's
management, administrative, servicing, custodian and collection functions under
the Agreement. Upon such termination, the Back-up Servicer will succeed to all
the responsibilities, duties and liabilities of the Servicer under the Agreement
and will be entitled to similar compensation arrangements, PROVIDED, HOWEVER,
that the Back-up Servicer will not assume any obligation of the Seller to
repurchase Contracts for breach of representations and warranties, and the
Back-up Servicer will not be liable for any acts or omissions of the Servicer
occurring prior to a transfer of the Servicer's servicing and related functions
or for any breach by the Servicer of any of its representations and warranties
contained in the Agreement or any related document or agreement. Notwithstanding
such termination, the Servicer shall be entitled to payment of certain amounts
payable to it prior to such termination, for services rendered prior to such
termination. No such termination will affect in any manner the Seller's
obligation to repurchase certain Contracts for breaches of representations and
warranties under the Agreement. In the event that the Back-up Servicer in so
acting would be in violation of legal requirements with a resulting material
adverse effect upon it, it may resign such role and if a successor has not been
appointed within 60 days, it may petition a court of competent jurisdiction for
its removal.
Following an Event of Termination, the Trustee shall terminate the Lockbox
Agreement and direct all Obligors under the Contracts to make all payments under
the Contracts to the Trustee, or to a lockbox established by the Trustee.
TERMINATION OF THE AGREEMENT
The Agreement will terminate (after distribution of all Class A
Distributable Amounts and Class B Distributable Amounts due to Class A
Certificateholders and Class B Certificateholders) on the Payment Date on which
the Class A Certificate Balance and Class B Certificate Balance is reduced to
zero; provided, that in no event shall the trust created hereby continue beyond
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof. "DESCRIPTION OF THE
CERTIFICATES-- REPURCHASE OPTION" above. However, the Seller's representations,
warranties and indemnities will survive any termination of the Agreement. Upon
termination, amounts in the Collection Account, if any, will be paid to the
Seller. See "DESCRIPTION OF THE CERTIFICATES--SERVICING COMPENSATION AND PAYMENT
OF EXPENSES" above.
AMENDMENT; WAIVER
The Agreement may be amended by agreement of the Trustee, the Servicer and
the Trust Depositor at any time without the consent of the Certificateholders to
correct manifest error, to cure any ambiguity, to correct or supplement any
provision which may be inconsistent with any other provision or to add
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other provisions not inconsistent with the Agreement upon receipt of an opinion
of counsel to the Trust Depositor that such amendment will not adversely affect
in any material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Trustee, the
Servicer and the Trust Depositor, and with the consent of Certificateholders
evidencing Fractional Interests representing 66-2/3 % or more of the Certificate
Principal Balance of each Class voting as a separate Class PROVIDED that no such
amendment or waiver shall (a) reduce in any manner the amount of, or delay the
timing of, collections of payments on Contracts or distributions which are
required to be made on any Certificate or (b) reduce the aggregate amount of
Certificates required for any amendment of the Agreement on any waiver of an
Event of Termination, without unanimous consent of the Certificateholders.
The Trustee is required under the Agreement to furnish Certificateholders,
S&P and Moody's with notice promptly upon execution of any amendment to the
Agreement and a copy of any such amendment.
INDEMNIFICATION
The Agreement will provide that the Servicer will defend and indemnify the
Trust, the Trustee (including any agent of the Trustee), and the
Certificateholders against any and all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel and expenses
of litigation arising out of or resulting from the use, ownership or operation
by the Servicer or any affiliate thereof of any Motorcycle securing a Contract.
The Transfer and Sale Agreement further provides that the Seller will pay any
taxes and defend, indemnify and hold harmless the Trust, the Trustee (including
any agent of the Trustee) and the Certificateholders against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation for any taxes which may at any
time be asserted with respect to the conveyance of the Contracts to the Trust
(but not including any federal, state or other tax arising out of the creation
of the Trust and the issuance of the Certificates).
The Agreement will also provide that the Servicer, in connection with its
duties as servicer of the Contracts, will defend and indemnify the Trust, the
Trustee and the Certificateholders (which indemnification will survive any
removal of the Seller as Servicer of the Contracts) against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation, in respect of any action taken
by the Servicer with respect to any Contract.
DUTIES AND IMMUNITIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, the Certificates or of any Contract, Contract file or related
documents, and will not be accountable for the use or application by the Trust
Depositor of any funds paid to the Trust Depositor in consideration of the
conveyance of the Contracts or deposited into or withdrawn from the Collection
Account by the Servicer. If no Event of Termination has occurred, the Trustee
will be required to perform only those duties specifically required of it under
the Agreement and will not be personally liable for any actions taken, suffered
or omitted by it in good faith with the direction of Certificateholders
evidencing Fractional Interests representing at least 25% of the Certificate
Principal Balance of each Class voting as a separate Class. However, upon
receipt of the various certificates, reports or other instruments required to be
furnished to it, the Trustee will be required to examine them to determine
whether they conform as to form to the requirements of the Agreement.
Certificateholders with Fractional Interests representing 25% or more of the
Certificate Principal Balance of each Class voting as a separate Class shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee under the Agreement, or exercising any
trust or power conferred on the Trustee under the Agreement, except that the
required
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percentage for waivers of Events of Termination shall be 51% or more of each
Class voting as a separate Class.
Under the Agreement the Servicer will agree to indemnify the Trustee for,
and to hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the Trust and its duties thereunder, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
thereunder.
The Agreement also provides that the Trustee will maintain at its expense in
Chicago, Illinois, an office or agency where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee and the certificate registrar and transfer agent in respect of the
Certificates pursuant to the Agreement may be served. On the date hereof the
Trustee's office for such purposes is located at 311 West Monroe Street, 12th
Floor, Chicago, Illinois 60606. The Trustee will promptly give written notice to
the Trust Depositor and the Certificateholders of any change thereof.
THE TRUSTEE
The Trustee is an Illinois banking corporation. The Trustee may resign at
any time, in which event the Servicer will be obligated to appoint a successor
Trustee. The Servicer may also remove the Trustee if the Trustee ceases to be
eligible to continue as such under the Agreement or if the Trustee becomes
insolvent. In such circumstances, the Servicer will also be obligated to appoint
a successor Trustee. Any resignation or removal of the Trustee and appointment
of a successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee. For its services under the Agreement, the
Trustee will receive the Trustee's Fee.
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS;
REPURCHASE OBLIGATIONS
GENERAL
As a result of the Seller's conveyance and assignment of the Contracts to
the Trust Depositor pursuant to the Transfer and Sale Agreement and the Trust
Depositor's conveyance and assignment of the Contracts to the Trust pursuant to
the Agreement, the Certificateholders, through the Trust, will succeed
collectively to all of the rights under such Contracts (including the right to
receive payment on the Contracts) on or after the related Cutoff Date. Each
Contract evidences both (a) the obligation of the Obligor to repay the loan
evidenced thereby and (b) the grant of a security interest in the Motorcycle to
secure repayment of such loan. Certain aspects of both features of the Contracts
are more fully described below.
The Contracts are "CHATTEL PAPER" as defined in the Uniform Commercial Code
(the "UCC") in effect in the states in which the Motorcycles were initially
registered. Pursuant to the UCC, the sale of chattel paper is treated in a
manner similar to perfection of a security interest in chattel paper. The Seller
and the Trust Depositor will make an appropriate filing of UCC-1 financing
statements in Nevada and Illinois to give notice of the Trust's ownership of the
Contracts, and the Contracts held by the Servicer as custodian will be stamped
to reflect their conveyance and assignment from the Seller to the Trust
Depositor and the Trust Depositor to the Trust. However, if a subsequent
purchaser were able to take physical possession of any Contracts without notice
of such conveyance and assignment, the Trust's interest in those Contracts could
be defeated. See "DESCRIPTION OF THE CERTIFICATES--CONVEYANCE OF CONTRACTS"
above.
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SECURITY INTERESTS IN THE MOTORCYCLES
The Motorcycles securing the Contracts are located in 50 states and the
District of Columbia. Security interests in motorcycles may be perfected either
by notation of the secured party's lien on the certificate of title or by
delivery of the required documents and payment of a fee to the state motor
vehicle authority, depending on state law. The Seller's practice is to effect
such notation or delivery of the required documents and fees, and to obtain
possession of the certificate of title, as appropriate under the laws of the
state in which any Motorcycle securing a Motorcycle conditional sales contract
is registered. In the event either the Seller fails, due to clerical error, to
effect such notation or delivery, or files the security interest under the wrong
law, the Seller may not have a first priority security interest in the
Motorcycle securing a Contract. In such event, the only recourse of the Trust
would be against the Seller pursuant to its repurchase obligation. See "SECURITY
INTEREST AND OTHER ASPECTS OF THE CONTRACTS; REPURCHASE OBLIGATIONS--REPURCHASE
OBLIGATIONS" below. However, the Seller believes that it has obtained a
perfected first priority security interest by proper notation or delivery of the
required documents and fees with respect to all of the Motorcycles securing
Contracts.
The Seller will convey and assign its security interest in the Motorcycles
to the Trust Depositor pursuant to the Transfer and Sale Agreement, and the
Trust Depositor will convey and assign its security interest in the Motorcycles
to the Trust pursuant to the Agreement. However, because of the administrative
burden and expense, neither the Seller, the Trust Depositor nor the Trustee will
amend the certificates of title to identify the Trust as the new secured party
and, accordingly, the Seller will continue to be named as the secured party on
the certificates of title relating to the Motorcycles. See generally "RISK
FACTORS--RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES" in the
Prospectus. The Seller, as Servicer, will continue to hold any certificates of
title relating to the Motorcycles in its possession as custodian and agent for
the Trust pursuant to the Agreement.
In the event that the owner of a Motorcycle moves to a state other than the
state in which such Motorcycle initially is registered, under the laws of most
states the perfected security interest in the Motorcycle would continue for four
months after such relocation and thereafter until the owner re-registers the
motorcycle in such state. A majority of states generally require surrender of a
certificate of title to re-register a motorcycle; accordingly, the Servicer must
surrender possession if it holds the certificate of title to such Motorcycle or,
in the case of Motorcycles registered in states which provide for notation of
lien, the Seller would receive notice of surrender if the security interest in
the Motorcycle is noted on the certificate of title. Accordingly, the Servicer
would have the opportunity to re-perfect its security interest in the Motorcycle
in the state of relocation. In states which do not require a certificate of
title for registration of a motor vehicle, re-registration could defeat
perfection. In the ordinary course of servicing its portfolio of Motorcycle
conditional sales contracts, the Servicer takes steps to effect such re-
perfection upon receipt of notice of re-registration or information from the
obligor or the obligor's insurance carrier as to relocation. Similarly, when an
obligor under a Motorcycle conditional sales contract sells a Motorcycle, the
Servicer must surrender possession of the certificate of title or will receive
notice as a result of its lien noted thereon and accordingly will have an
opportunity to require satisfaction of the related Motorcycle conditional sales
contract before release of the lien. Under the Agreement, the Servicer is
obligated to take such steps, at its expense, as are necessary to maintain
perfection of security interests in the Motorcycles.
Under the laws of most states, liens for repairs performed on a motorcycle
take priority even over a perfected security interest. The Seller will represent
in the Transfer and Sale Agreement that as of the sale date of the Contracts, it
has no knowledge of any such liens with respect to any Motorcycle securing
payment on any Contract. However, such liens could arise at any time during the
term of a Contract. No notice will be given to the Trust or Certificateholders
in the event such a lien arises.
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ENFORCEMENT OF SECURITY INTERESTS IN MOTORCYCLES
The Servicer on behalf of the Trust may take action to enforce the Trust's
security interest with respect to defaulted Contracts by repossession and resale
of the Motorcycles securing such defaulted Contracts. Under the laws applicable
in most states, a creditor can repossess a motorcycle securing a contract by
voluntary surrender, by "SELF-HELP" repossession that is "PEACEFUL" (i.e.,
without breach of the peace) or, in the absence of voluntary surrender and the
ability to repossess without breach of the peace, by judicial process. The UCC
and consumer protection laws in most states place restrictions on repossession
sales, including requiring prior notice to the debtor and commercial
reasonableness in effecting such a sale. In the event of such repossession and
resale of a Motorcycle, the Trust would be entitled to be paid out of the sale
proceeds before such proceeds could be applied to the payment of the claims of
unsecured creditors or the holders of subsequently perfected security interests
or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to obtain a
deficiency judgment from a debtor for any deficiency on repossession and resale
of the motor vehicle securing such debtor's loan. However, some states impose
prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
OTHER MATTERS
The so-called "HOLDER-IN-DUE-COURSE" rule of the Federal Trade Commission is
intended to defeat the ability of the transferor of a consumer credit contract
which is the seller of goods which gave rise to the transaction (and certain
related lenders' assignees) to transfer such contract free of notice of claims
by the debtor thereunder. The effect of this rule is to subject the assignee of
such a contract to all claims and defenses which the debtor could assert against
the seller of goods. Liability under this rule, which would be applicable to the
Trust, is limited to amounts paid under a Contract; however, the Obligor also
may be able to assert the rule to set off remaining amounts due as a defense
against a claim brought by the Trust against such Obligor. Numerous other
federal and state consumer protection laws impose requirements applicable to the
origination of and lending pursuant to the Contracts, including the Truth in
Lending Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the
Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt
Collection Practices Act and the Uniform Consumer Credit Code. In the case of
some of these laws, the failure to comply with their provisions may affect the
enforceability of the related Contract. See generally "RISK FACTORS--ADDITIONAL
LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE ON ITS SECURITY
INTEREST IN THE MOTORCYCLES; CONSUMER PROTECTION LAWS" in the Prospectus.
REPURCHASE OBLIGATIONS
Under the Transfer and Sale Agreement, the Seller will make warranties
relating to validity, subsistence, perfection and priority of the security
interest in each Motorcycle securing a Contract. Accordingly, if any defect
exists in the perfection of the security interest in any Motorcycle and such
defect materially adversely affects a Contract, such defect would constitute a
breach of a representation and warranty under the Transfer and Sale Agreement
and would create an obligation of the Seller to repurchase such Contract from
the Trust unless the breach is cured. See "DESCRIPTION OF THE
CERTIFICATES--CONVEYANCE OF CONTRACTS" above.
In addition, the Seller will also warrant under the Transfer and Sale
Agreement that each Contract complies with all requirements of law. Accordingly,
if any Obligor has a claim against the Trust for violation of any law and such
claim materially adversely affects the Trust's interest in a Contract, such
violation would constitute a breach of a representation and warranty under the
Transfer and Sale Agreement and would create an obligation to repurchase such
Contract unless the breach is cured. See "DESCRIPTION OF THE
CERTIFICATES--CONVEYANCE OF CONTRACTS" above.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of certain United States
federal income tax consequences of the purchase, ownership and disposition of
the Certificates. For a full description of the material federal income tax
consequences of the ownership of the Certificates in the Trust, see the
Prospectus, "Federal Income Tax Consequences--Grantor Trusts." Any material
variations from the discussion in the Prospectus, "Federal Income Tax
Consequences--Grantor Trusts" will be specified below.
The discussion herein is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), Treasury Regulations promulgated
thereunder, current administrative rulings, judicial decisions and other
applicable authorities in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect. There are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving a trust and
instruments issued by that trust with terms similar to those of the Trust and
the Certificates. As a result, there can be no assurance that the IRS will not
challenge the conclusions set forth in the following summary, and no ruling from
the IRS has been or will be sought on any of the issues discussed below.
Furthermore, legislative, judicial or administrative changes may occur, perhaps
with retroactive effect, which could affect the accuracy of the statements and
conclusions set forth herein as well as the tax consequences to holders of the
the Certificates.
This discussion and the more detailed discussion set forth in the
Prospectus, "Federal Income Tax Consequences--Grantor Trusts," do not purport to
deal with all aspects of federal income taxation that may be relevant to all
holders of Certificates in light of their personal investment or tax
circumstances nor to certain types of holders who may be subject to special
treatment under the federal income tax laws (including, without limitation,
financial institutions, broker-dealers, insurance companies, foreign persons,
tax-exempt organizations and persons who hold the Certificates as part of a
straddle, hedging or conversion transaction). This information is generally
directed to prospective purchasers who purchase Certificates at the time of
original issue, who are citizens or residents of the United States, and who hold
the Certificates as "CAPITAL ASSETS" within the meaning of Section 1221 of the
Code. Taxpayers and preparers of tax returns (including those filed by any
partnership or other issuer) should be aware that under applicable Treasury
Regulations a provider of advice on specific issues of law is not considered an
income tax return preparer unless the advice is (i) given with respect to events
that have occurred at the time the advice is rendered and is not given with
respect to the consequences of contemplated actions, and (ii) is directly
relevant to the determination of an entry on a tax return. Accordingly,
taxpayers should consult their own tax advisors and tax return preparers
regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein. PROSPECTIVE INVESTORS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL,
FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CERTIFICATES.
TAX CHARACTERIZATION OF THE TRUST
Winston & Strawn, as federal tax counsel ("FEDERAL TAX COUNSEL") to the
Trust Depositor, has delivered an opinion to the Trust Depositor that for U.S.
federal income tax purposes the Trust will be classified as a grantor trust and
not as an association taxable as a corporation, and that each Certificateholder
will be treated as the owner of an undivided interest in the assets and income
of the Trust. An opinion of counsel is not binding on a court or the IRS and
there can be no assurance that the IRS or a court will agree with Federal Tax
Counsel's opinion.
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GENERAL TAX TREATMENT OF CERTIFICATEHOLDERS
As a grantor trust, each Certificateholder will be treated as the owner of
an undivided interest in the assets of the Trust, including the Contracts.
Accordingly, each Certificateholder must report on its federal income tax return
its share of income from the Contracts and other Trust assets and, subject to
the limitations on deductions by individuals, estates, and trusts, may deduct
its share of the reasonable fees and expenses paid by the Trust, as if such
Certificateholder held its share of the assets of the Trust directly.
The Certificates will be treated as representing interests in stripped bonds
and stripped coupons within the meaning of Section 1286 of the Code. As a
result, Certificateholders will be treated as having original issue discount
("OID") which is includible in income as it economically accrues regardless of
when cash is actually paid. It is expected, however, that the amount and accrual
of OID should closely correspond to the timing and amount of payments on the
Certificates at their respective pass-through rates so that a Certificateholder
will not experience any material difference between the cash received at the
pass-through rate and the Certificateholder's taxable OID income. A
Certificateholder will recognize gain or loss when the Certificateholder sells a
Certificate or an asset of the Trust is sold. For a complete discussion of the
federal tax consequences of owning a Certificate in the Trust, see Prospectus,
"Federal Income Tax Consequences--Grantor Trusts."
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
THE CLASS A CERTIFICATES DURING THE FUNDING PERIOD. During the Funding
Period, the Class A Certificates may not be acquired by any employee benefit
plan subject to ERISA or Section 4975 of the Code.
THE CLASS A CERTIFICATES AFTER THE FUNDING PERIOD. Notwithstanding the
above described restriction which is applicable solely during the Funding
Period, the following analysis is applicable to a Class A Certificate after the
Funding Period. ERISA and Section 4975 of the Code impose certain restrictions
on employee benefit plans subject to ERISA and/or subject to the requirements of
Section 4975 of the Code (including, for example, individual retirement accounts
and Keogh plans) (collectively, "PLANS"), and on persons who are "PARTIES IN
INTEREST" (as defined under ERISA) or "DISQUALIFIED PERSONS" (as defined under
the Code) (collectively, "PARTIES IN INTEREST") with respect to such Plans.
Certain employee benefit plans, such as governmental plans and church plans
(assuming that no election has been made under Section 410(d) of the Code) are
not subject to the restrictions of ERISA or Section 4975 of the Code. However,
any such governmental or church plan which is qualified under Section 401(a) of
the Code and exempt from taxation under Section 501(a) of the Code is subject to
the prohibited transaction rules set forth under Section 503 of the Code and may
be subject to additional fiduciary constraints under applicable state or local
law.
Investments by Plans covered by ERISA are subject to general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with both the documents governing the Plan and the prohibited
transaction provisions of ERISA and the Code. Any Plan fiduciary which proposes
to cause a Plan to acquire any of the Certificates should consult with its
counsel with respect to the potential consequences under ERISA and the Code of
the Plan's acquisition and ownership of such Certificates.
PLAN ASSETS. If a Plan acquires a Certificate, then the Plan's assets may
include both the Certificate it acquires and an undivided interest in the
underlying assets of the Trust. Accordingly, the acquisition of a Certificate
might constitute an improper delegation by such Plan's fiduciary of the duty to
manage Plan assets. ERISA and the Code do not define "PLAN ASSETS." The United
States Department of Labor (the
45
<PAGE>
"DOL") has issued a final regulation (29 C.F.R. Section2510.3-101) (the "PLAN
ASSET REGULATION") containing rules for determining what constitutes the assets
of a Plan. The Plan Asset Regulation provides that, as a general rule, the
underlying assets and properties of corporations, partnerships or trusts may be
deemed to be "plan assets" unless certain exceptions apply. This offering has
not been structured to avoid plan asset characterization. If the underlying
assets of the Trust are considered "plan assets," the persons providing services
with respect to the assets of the Trust may be subject to the fiduciary
responsibility provisions of Title I of ERISA and be subject to the prohibited
transaction provisions of ERISA and the Code with respect to transactions
involving such assets unless such transactions are subject to a statutory or
administrative exemption.
PROHIBITED TRANSACTIONS. Each fiduciary should also be aware that Section
406 of ERISA and Section 4975 of the Code prohibit a Plan from engaging in
certain transactions involving the assets of the Plan with a person or entity
that is a "PARTY IN INTEREST" to the Plan ("PROHIBITED TRANSACTIONS"). A "PARTY
IN INTEREST" is defined to include, among others, a fiduciary of the Plan, a
service provider to the Plan, an employer of participants in the Plan and
certain affiliates of such parties. Section 4975 of the Code (or, in some cases,
Section 502 of ERISA) imposes substantial excise taxes on parties in interest
engaging in non-exempted prohibited transactions. A purchase or holding of a
Certificate by a Plan could result in a prohibited transaction; however, such
purchase or holding may be exempt from the prohibited transaction restrictions
in accordance with certain exemptions promulgated by the DOL.
UNDERWRITERS PROHIBITED TRANSACTION EXEMPTION. DOL has granted to Salomon
Brothers Inc an administrative exemption (Prohibited Transaction Exemption
89-89; Exemption Application No. D-6446, 54 Fed. Reg. 42589 (1989)) (the
"EXEMPTION") from certain of the prohibited transaction rules of ERISA and the
related excise tax provisions of Section 4975 of the Code with respect to the
initial purchase, the holding and the subsequent resale in the secondary market
by Plans of certificates in pass-through trusts that consist of certain
receivables, loans, and other obligations that meet the conditions and
requirements of the Exemption. The loans covered by the Exemption include
obligations that bear interest or are purchased at a discount and which are
secured by motor vehicles or equipment or qualified motor vehicle leases such as
the Contracts. It should be noted, however, that in issuing the exemption, the
DOL may not have considered interests in pools of the exact nature of the
Certificates.
Among the conditions that must be satisfied for the Exemption to apply to
the acquisition of the Certificates by a Plan are the following:
(1) the acquisition of the Certificates by a Plan is on terms (including
the price for the Certificates) that are at least as favorable to the Plan
as they would be in an arm's-length transaction with an unrelated party;
(2) the rights and interest evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by other
Certificates of the Trust;
(3) the Certificates acquired by the Plan have received a rating at the
time of such acquisition that is one of the three highest generic rating
categories from either S&P, Moody's, Duff & Phelps Inc. ("D&P") or Fitch
Investors Service, Inc. ("FITCH");
(4) the Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below);
(5) the sum of all payments made to and retained by the Placement Agent
in connection with the distribution of the Certificates represents not more
than reasonable compensation for placing the Certificates; the sum of all
payments made to and retained by the Trust Depositor pursuant to the
assignment of the Contracts to the Trust represents not more than the fair
market value of such Contracts; the sum of all payments made to and retained
by the Servicer represents not more than reasonable compensation for such
person's services under the Agreement and reimbursements of such person's
reasonable expenses in connection therewith; and
46
<PAGE>
(6) the Plan investing in the Certificates is an "ACCREDITED INVESTOR"
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
In light of the foregoing requirements listed in (2) and (3), following the
expiration of the Funding Period only the Class A Certificates may be eligible
for the Exemption.
The trust fund (I.E., in the case of the Certificates, the Trust) must also
meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, Fitch or D&P for
at least one year prior to the Plan's acquisition of Certificates; and
(iii) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of Certificates.
Moreover, the Exemption may provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables held in the trust
provided that, among other requirements, (i) in the case of an acquisition in
connection with the initial issuance of certificates, at least fifty percent
(50%) of each class of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group; (ii) such fiduciary (or its
affiliate) is an obligor with respect to five percent or less of the fair market
value of the obligations contained in the trust; (iii) the Plan's investment in
certificates of any class does not exceed twenty-five percent (25%) of all of
the certificates of that class outstanding at the time of the acquisition; and
(iv) immediately after the acquisition, no more than twenty-five percent (25%)
of the assets of the Plan with respect to which such person is a fiduciary are
invested in certificates representing an interest in one or more trusts
containing assets sold or served by the same entity.
The Exemption does not apply to Plans sponsored by the Trust Depositor, the
Placement Agent, the Trustee, the Servicer, the Paying Agent, the Certificate
Registrar, any insurer of the assets of the Trust, any Obligor with respect to
Contracts included in the Trust constituting more than five percent (5%) of the
aggregate unamortized principal balance of the assets in the Trust, or any
affiliate of such parties (the "RESTRICTED GROUP").
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemption
or any other administrative exemption from the prohibited transaction provisions
of ERISA and the Code, and the potential consequences in their specific
circumstances, prior to making an investment in the Certificates. Moreover, each
Plan fiduciary should determine whether under the general fiduciary standards of
investment procedure and diversification an investment in the Certificates is
appropriate for the Plan, taking into account the overall investment policy of
the Plan and the composition of the Plan's investment portfolio.
THE CLASS B CERTIFICATES
The Class B Certificates may not be acquired or held by any employee benefit
plan, individual retirement account or Keogh plan subject to ERISA or Section
4975 of the Code, other than after the Funding Period by an insurance company
using assets of its general account under circumstances in which such purchase
and holding of such Certificates would be exempt from the prohibited transaction
provision of ERISA and the Code under Prohibited Transaction Class Exemption
95-60.
47
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated [ ], 199[ ], among the Seller, Trust Depositor and the Underwriter
(the "UNDERWRITING AGREEMENT"), the Seller has agreed to cause the Trust to sell
to the Underwriter named below (the "UNDERWRITER"), and the Underwriter has
agreed to purchase, the principal amount of the Certificates set forth below.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
CERTIFICATES, CERTIFICATES,
UNDERWRITER CLASS A CLASS B
- -------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Salomon Brothers Inc.................................................................. $ $
</TABLE>
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates if
any Certificates are purchased. In the event of default by the Underwriter, the
Underwriting Agreement provides that, in certain circumstances, the Underwriting
Agreement may be terminated.
If the Underwriter creates a short position in the Certificates in
connection with this Offering, i.e., if it sells more Certificates than is set
forth on the cover page of this Prospectus Supplement, the Underwriter may
reduce that short position by purchasing Cerificates in the open market.
In general, purchases of a security to reduce a short position could cause
the price of the security to be higher than it might be in the absence of such
purchases.
Neither the Seller nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above, if engaged in, may have on the prices of the Certificates. In
addition, neither the Seller nor the Underwriter makes any representation that
the Underwriter will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Distribution of the Certificates may be made by the Underwriter from time to
time in one or more negotiated transactions, or otherwise, at varying prices to
be determined at the time of sale. The Underwriter may effect such transactions
by selling the Certificates to or through dealers, and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriter. In connection with the sale of the Certificates, the
Underwriter may be deemed to have received compensation from the Seller in the
form of underwriting compensation. The Underwriter and any dealers that
participate with the Underwriter in the distribution of the Certificates may be
deemed to be an Underwriter and any commissions received by them and any profit
on the resale of the Certificates positioned by them may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Underwriter has represented and agreed that (i) it has not offered or
sold and, prior to the expiration of the period of six months from the Closing
Date, will not offer or sell any Certificates to persons in the United Kingdom,
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulation 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Certificates in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of the Certificates to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995, or is a person to whom such document
may otherwise lawfully be issued or passed on.
48
<PAGE>
The Underwriting Agreement provides that the Seller and Trust Depositor will
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act, or contribute to payments the Underwriter may be
required to make in respect thereof.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Seller, Servicer, Trust Depositor and the Trust by Winston &
Strawn, Chicago, Illinois. Certain legal matters will be passed upon for the
Underwriter by Brown & Wood LLP, New York, New York.
49
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
Accountant's Report................................................. 38
Advance............................................................. 9
Agreement........................................................... 1
APR................................................................. 17
Available Funds..................................................... 31
Available Interest.................................................. 3
Available Principal................................................. 5
Average Default Ratio............................................... 34
Average Delinquency Ratio........................................... 34
Average Loss Ratio.................................................. 34
Buell............................................................... 1
Carrying Charges.................................................... 8
Certificates........................................................ 1, 1
Class A Certificate Balance......................................... 3
Class A Certificateholders.......................................... 2
Class A Certificates................................................ 1, 1
Class A Distributable Amount........................................ 31
Class A Initial Certificate Balance................................. 1
Class A Interest Carryover Shortfall................................ 3
Class A Interest Distributable Amount............................... 2
Class A Pass-Through Rate........................................... 2, 2
Class A Percentage.................................................. 1, 1
Class A Principal Carryover Shortfall............................... 5
Class A Principal Distributable Amount.............................. 4
Class B Certificate Balance......................................... 3
Class B Certificateholders.......................................... 2
Class B Certificates................................................ 1, 1
Class B Distributable Amount........................................ 31
Class B Initial Certificate Balance................................. 1
Class B Interest Carryover Shortfall................................ 3
Class B Interest Distributable Amount............................... 2
Class B Pass-Through Rate........................................... 2, 2
Class B Percentage.................................................. 1, 1
Class B Principal Carryover Shortfall............................... 5
Class B Principal Distributable Amount.............................. 4
Collateral Agent.................................................... 12
Collection Account.................................................. 15
Commission.......................................................... 3
Contracts........................................................... 1
Cumulative Loss Ratio............................................... 34
Cutoff Date......................................................... 28
Dealer Recourse..................................................... 16
Defaulted Contract.................................................. 34
Delinquency Amount.................................................. 34
Deposit Agreement................................................... 1
Determination Date.................................................. 32
DOL................................................................. 48
Due Period.......................................................... 3
Eaglemark........................................................... 1
Eaglemark Financial................................................. 22
Eligible Account.................................................... 31
</TABLE>
49
<PAGE>
<TABLE>
<S> <C>
Event of Termination................................................ 40
Exchange Act........................................................ 3
Final Scheduled Payment Date........................................ 2
Fractional Interest................................................. 33
Funding Period...................................................... 7
Harley-Davidson..................................................... 1
Initial Contracts................................................... 1
Initial Cutoff Date................................................. 1, 1
Interest Reserve Account............................................ 8
Lien Certificate.................................................... 29
Liquidated Contract................................................. 34
Mandatory Special Distribution...................................... 2
Monthly Principal................................................... 4
Monthly Servicing Fee............................................... 10
Motorcycles......................................................... 1
Net Liquidation Losses.............................................. 34
Net Liquidation Proceeds............................................ 34
OID................................................................. 46
Payment Date........................................................ 2, 2
Plans............................................................... 48
Pre-Funded Amount................................................... 7
Pre-Funding Account................................................. 1
Principal Balance................................................... 4
Rating Agencies..................................................... 2
Record Date......................................................... 2
Registrar of Titles................................................. 29
Repurchase Price.................................................... 15
Reserve Agent....................................................... 6
Reserve Fund........................................................ 6
Reserve Fund Additional Deposits.................................... 6
Reserve Fund Deposits............................................... 6
Reserve Fund Initial Deposit........................................ 6
Reserve Fund Requisite Amount....................................... 6, 33
Reserve Fund Trigger Event.......................................... 34
Restricted Group.................................................... 50
Security Agreement.................................................. 1
Seller/Servicer..................................................... 27
Servicer............................................................ 1
Servicing Fee....................................................... 10, 38
Special Distribution................................................ 8
Subsequent Contracts................................................ 2
Subsequent Cutoff Date.............................................. 7
Subsequent Transfer Agreement....................................... 12
Subsequent Transfer Date............................................ 7
Transfer and Sale Agreement......................................... 2
Trust............................................................... 1
Trust Depositor..................................................... 1
Trust Stripped Bonds................................................ 45
Trustee............................................................. 1
UCC................................................................. 13
</TABLE>
50
<PAGE>
SUBJECT TO COMPLETION, DATED [ ], 199
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [ ], 199 )
$[ ]
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST 199[ ]
$[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES,
CLASS A-1
$[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES,
CLASS A-2
$[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES
EAGLEMARK, INC.
SELLER AND SERVICER
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
TRUST DEPOSITOR
The Harley-Davidson Eaglemark Motorcycle Trust [ ] Harley-Davidson Motorcycle
Contract Backed Securities described in this Prospectus Supplement will consist
of two Classes of notes (respectively, the "CLASS A-1 NOTES", and the "CLASS A-2
NOTES" and collectively, the "NOTES") and one Class of certificates (the
"CERTIFICATES" and, together with the Notes, the "SECURITIES"). Principal, in
the amounts set forth herein, and interest at the Interest Rates and
Pass-Through Rate specified above for each Class of Notes and the Certificates
will be distributed to the related Securityholders on the fifteenth day of each
month (or, if such day is not a Business Day, on the immediately succeeding
Business Day, each, a "DISTRIBUTION DATE"), beginning [ ], 1997.
Distributions on the Certificates will be subordinated to payments due on the
Notes to the extent described herein. Each Class of Notes and the Certificates
will be payable in full on the Final Distribution Dates (as defined herein)
specified herein for such Securities.
Distributions on the Certificates will be subordinated in priority to payments
due on the Notes. Payments of principal on the Class A-2 Notes generally (with
certain limited exceptions described herein) will not be made before repayment
at the entire principal amount due on the Class A-1 Notes. See "Summary of
Terms--Securities Offered-General" herein.
(COVER CONTINUED ON NEXT PAGE)
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE POTENTIAL RISK FACTORS SET
FORTH UNDER "RISK FACTORS" ON PAGE 16 HEREOF AND ON PAGE 12 OF THE PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITER OF THE SECURITIES [ ]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 199 .
<PAGE>
(COVER PAGE CONTINUED)
The Harley-Davidson Eaglemark Motorcycle Trust 199 -[ ] (the "TRUST")
will be formed pursuant to a Trust Agreement dated as of [ ] 1, 199 (the
"TRUST AGREEMENT") entered into by and between Eaglemark Customer Funding
Corporation-[ ] (the "TRUST DEPOSITOR") and Wilmington Trust Company, as Owner
Trustee (the "OWNER TRUSTEE"). The Trust Depositor is a wholly owned, limited
purpose subsidiary of Eaglemark, Inc. ("EAGLEMARK"). The Certificates will be
issued pursuant to the Trust Agreement and will represent fractional undivided
equity interests in the Trust. The Notes will be issued and secured pursuant to
an Indenture dated as of [ ] 1, 199 (the "INDENTURE") to be entered into
by and between the Trust and Harris Trust and Savings Bank, as Indenture Trustee
(the "INDENTURE TRUSTEE" and together with the Owner Trustee, the "TRUSTEES"),
and will represent obligations of the Trust.
The Underwriter has agreed to purchase the Notes and the Certificates from
the Trust as provided herein, and the Securities will be offered by the
Underwriter from time to time as provided herein in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. The aggregate
proceeds to the Seller from the sale of the Securities are expected to be
$ before deducting expenses payable by the Seller of approximately
$ .
The Securities are offered subject to receipt and acceptance by the
Underwriter and to the Underwriter's right to reject any offer in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Securities will be made in book-entry form through the
facilities of The Depository Trust Company ("DTC"), and solely in the case of
the Notes, Cedel Bank, societe anonyme ("CEDEL") and the Euroclear System
("EUROCLEAR") on or about , 199 .
The Trust property will consist of an initial pool of fixed-rate, simple
interest motorcycle conditional sales contracts (the "INITIAL CONTRACTS" which,
together with any Subsequent Contracts as defined below, are collectively the
"CONTRACTS") relating to Motorcycles manufactured by Harley-Davidson, Inc.
("HARLEY-DAVIDSON") or, in certain limited instances as described herein,
Motorcycles manufactured by an affiliate of Harley-Davidson, Buell Motorcycle
Company ("BUELL"), including all rights to receive payments collected on such
Initial Contracts on or after [ ], 199[ ] (the "INITIAL CUTOFF DATE").
The Trust property also will consist of security interests in the Motorcycles
financed through the Contracts; proceeds from certain insurance policies as
described in "CERTAIN INFORMATION REGARDING THE SECURITIES--INDIVIDUAL
MOTORCYCLE INSURANCE" herein; amounts held for the Trust in the Collection
Account; and certain other property as more fully described herein
(collectively, the "TRUST PROPERTY"). The Trust will also pledge certain monies
on deposit in a trust account (the "PRE-FUNDING ACCOUNT") to be established with
the Indenture Trustee on behalf of the Noteholders which will be used by the
Trust to purchase from the Trust Depositor Subsequent Contracts (as defined
herein).
The Contracts were originated by Eaglemark indirectly through
Harley-Davidson motorcycle dealers. Contracts with an aggregate principal
balance (as of the Initial Cutoff Date) of $[ ] will be sold by Eaglemark
(in such capacity, the "Seller") to the Trust Depositor on the date of issuance
of the Notes and Certificates pursuant to a Transfer and Sale Agreement dated as
of [ ] 1, 199 by and between the Seller and the Trust Depositor (the
"TRANSFER AND SALE AGREEMENT"), will be further transferred and assigned by the
Trust Depositor to the Trust on such date pursuant to the Sale and Servicing
Agreement dated as of [ ] 1, 199 (the "AGREEMENT") by and among the
Trust, the Trust Depositor, the Indenture Trustee and Eaglemark, as Servicer (in
such capacity, together with successors and assigns, the "SERVICER" ) and will
be pledged by the Trust to the Indenture Trustee pursuant to the Indenture.
Additional fixed-rate, simple interest Harley-Davidson (and, in limited
instances, Buell) motorcycle conditional sales contracts (the "SUBSEQUENT
CONTRACTS") will be sold from time to time by the Seller to the Trust Depositor
at or before the end of the Funding Period (as defined herein) and concurrently,
in accordance with the Agreement, transferred by the Trust Depositor to the
Trust and, in accordance with the Indenture, pledged by the Trust to the
Indenture Trustee, with the purchase price to be payable to the Trust Depositor
from funds on deposit in the Pre-Funding Account.
Principal, and interest with respect to the Class A-1 Notes of [ ]% per
annum (the "CLASS A-1 RATE") , the Class A-2 Notes of [ ]% per annum (the
"CLASS A-2 RATE"), and the Certificates of [ ]% per annum (the "PASS-THROUGH
RATE") will be distributable with respect to the Class A-1 Notes, the Class A-2
Notes and
<PAGE>
the Certificates on the Distribution Date. The final scheduled Distribution Date
of the Class A-1 Notes, Class A-2 Notes and the Certificates will be on the
Distribution Dates occurring in [ ], [ ] and
[ ], respectively. See "CERTAIN INFORMATION REGARDING THE
SECURITIES." However, payment in full of the Notes and Certificates could occur
earlier than such date as described herein. In addition, the Class A-2 Notes and
the Certificates will be subject to prepayment in whole, but not in part, on any
Distribution Date on which the Trust Depositor exercises its option to
repurchase the Contracts from the Trust. The Trust Depositor may repurchase the
Contracts from the Trust (and the Seller may concurrently repurchase such
Contracts from the Trust Depositor) when the Pool Balance has declined to less
than 10% of the Initial Pool Balance (such repurchase being referred to herein
as an "OPTIONAL PURCHASE"). Both the Class A-1 Notes and the Class A-2 Notes
will also be subject to partial mandatory prepayment, without premium, in the
event that funds remain in the Pre-Funding Account at the end of the Funding
Period (as defined herein).
It is a condition of issuance that the Class A-1 Notes and the Class A-2
Notes be rated AAA and Aaa by Standard & Poor's Ratings Services ("S&P") and
Moody's Investors Service, Inc. ("MOODY'S" and, together with S&P, the "RATING
AGENCIES"), respectively and that the Certificates be rated at least [ ] by
S&P and [ ]by Moody's.
THE NOTES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES WILL REPRESENT
BENEFICIAL EQUITY INTERESTS IN, THE TRUST AND WILL NOT REPRESENT OBLIGATIONS OF
OR INTERESTS IN EAGLEMARK FINANCIAL SERVICES, INC., EAGLEMARK, INC., EAGLEMARK
CUSTOMER FUNDING CORPORATION-[ ] OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF
THE NOTES, THE CERTIFICATES OR THE CONTRACTS IS INSURED OR GUARANTEED BY ANY
GOVERNMENTAL ENTITY.
THE SECURITIES ARE BEING OFFERED [BY THE SELLER] FROM TIME TO TIME PURSUANT
TO THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ACCOMPANYING THIS PROSPECTUS
SUPPLEMENT. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION
ABOUT THE OFFERING OF THE SECURITIES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL. SALES OF THE SECURITIES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
TO THE EXTENT THAT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT MODIFY
STATEMENTS CONTAINED IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Underwriter expects, but is not obligated,
to make a market in the Notes and the Certificates. There is no assurance that
any such market will develop, or if one does develop, that it will continue or
provide sufficient liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT AFFECT THE PRICE OF THE SECURITIES. SUCH TRANSACTIONS MAY INCLUDE THE
PURCHASE OF SECURITIES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF
THESE TRANSACTIONS, SEE "UNDERWRITING" HEREIN.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, the Seller or such
Underwriter will promptly deliver, or cause to be delivered, without charge, TO
SUCH INVESTOR a paper copy of the Prospectus Supplement and Prospectus.
UNTIL 90 DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
REPORTS TO SECURITYHOLDERS
Unless and until the Securities are issued in definitive certificate form,
monthly and annual unaudited reports containing information concerning the
Contracts will be prepared by the Servicer, and sent on behalf of the Trust only
to Cede & Co., as nominee of DTC and registered holder of the Certificates. See
"CERTAIN INFORMATION REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" and
"--REPORTS TO SECURITYHOLDERS" in the accompanying Prospectus. Such reports will
not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Servicer will file with the Securities and
Exchange Commission (the "COMMISSION") such periodic reports with respect to the
Trust as are required under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations of the Commission thereunder.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF TERMS..................................................................... 5
RISK FACTORS......................................................................... 16
FORMATION OF THE TRUST............................................................... 18
POOL FACTORS AND TRADING INFORMATION................................................. 19
USE OF PROCEEDS...................................................................... 19
THE CONTRACTS........................................................................ 19
HARLEY-DAVIDSON MOTORCYCLES.......................................................... 32
YIELD AND PREPAYMENT CONSIDERATIONS.................................................. 32
EAGLEMARK FINANCIAL SERVICES, INC.; EAGLEMARK, INC................................... 33
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ].......................................... 33
DESCRIPTION OF THE NOTES............................................................. 34
DESCRIPTION OF THE CERTIFICATES...................................................... 35
CERTAIN INFORMATION REGARDING THE SECURITIES......................................... 36
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS; REPURCHASE OBLIGATIONS........ 58
ERISA CONSIDERATIONS................................................................. 62
UNDERWRITING......................................................................... 63
RATINGS OF THE SECURITIES............................................................ 65
LEGAL MATTERS........................................................................ 65
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES........................ 66
INDEX OF TERMS....................................................................... [ ]
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SUMMARY OF TERMS
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE HEREIN AND IN THE PROSPECTUS. CERTAIN
CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT ON THE PAGES INDICATED IN THE "INDEX OF DEFINED TERMS" OR, TO THE
EXTENT NOT DEFINED HEREIN, HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE
PROSPECTUS.
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Trust........................ Harley-Davidson Eaglemark Motorcycle Trust 199[ ]-[ ]
(the "TRUST").
Trust Depositor.............. Eaglemark Customer Funding Corporation-[ ], a wholly
owned, limited-purpose subsidiary of Eaglemark, Inc. (the
"TRUST DEPOSITOR")
Seller and Servicer or
Seller/ Servicer............ Eaglemark, Inc. ("EAGLEMARK" or the "SELLER" or, in its
capacity as Servicer, the "SERVICER"), a 100% owned
subsidiary of Eaglemark Financial Services, Inc. ("EAGLEMARK
FINANCIAL").
Owner Trustee................ Wilmington Trust Company, a Delaware banking corporation (in
such capacity, the "OWNER TRUSTEE").
Indenture Trustee............ Harris Trust and Savings Bank, an Illinois banking
corporation (in such capacity, the "INDENTURE TRUSTEE"). The
Indenture Trustee will also act as Paying Agent under the
Indenture and the Trust Agreement.
Closing Date................. , 199
Securities Offered........... The securities offered are as follows:
A. General................. The Harley-Davidson Eaglemark Motorcycle Trust 199[ ]-[ ]
Harley-Davidson Motorcycle Contract Backed Notes (the
"NOTES") will represent indebtedness of the Trust secured by
the assets of the Trust (other than the Certificate
Distribution Account as defined herein). The Harley-Davidson
Eaglemark Motorcycle Trust 199[ ]-[ ]
Harley-Davidson Motorcycle Contract Backed Certificates (the
"CERTIFICATES" and, together with the Notes, the
"SECURITIES") will represent fractional undivided equity
interests in the Trust.
The Trust will issue two Classes of Notes pursuant to an
Indenture to be dated as of [ ] 1, 199 (the
"INDENTURE"), between the Trust and the Indenture Trustee,
as follows: (i) $[ ] aggregate principal amount of
Class A-1 [ ]% Harley-Davidson Motorcycle Contract Backed
Notes (the "CLASS A-1 NOTES") and (ii) $[ ] aggregate
principal amount of Class A-2 [ ]% Harley-Davidson
Motorcycle Contract Backed Notes (the "CLASS A-2 NOTES").
Payments of principal, made through the application of
available collections on the Contracts in an amount
reflecting reductions in the principal balances of the
Contracts, and from certain other available amounts as
described herein, will be made first on the Class A-1 Notes
until the Class A-1 Notes have been repaid in full (except
to the limited extent described in "SUMMARY OF TERMS--TERMS
OF THE NOTES--MANDATORY SPECIAL REDEMPTION" below), and
thereafter on the Class A-2 Notes until the Class A-2 Notes
have been repaid in full, and in each case prior to any
repayment of principal on the Certificates. Payments of
interest on the Class A-1 Notes and the Class A-2 Notes will
be made from available collections on the
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Contracts, and from certain other available amounts as
described herein, without priority of payment between such
Classes, but in each case prior to payment of interest on
the Certificates. See "CERTAIN INFORMATION REGARDING THE
SECURITIES-- DISTRIBUTIONS ON THE SECURITIES."Accordingly,
the principal distinction between an investment in the Class
A-1 Notes and the Class A-2 Notes is that holders of Class
A-1 Notes will receive a return of invested principal sooner
than holders of Class A-2 Notes.
The Trust will issue $[ ] aggregate principal amount of
[ ]% Certificates pursuant to a Trust Agreement to be
dated as of [ ]1, 199 (the "TRUST AGREEMENT") by and
between the Trust Depositor and the Owner Trustee (the Owner
Trustee, together with the Indenture Trustee, being
sometimes collectively referred to herein as the
"TRUSTEES"). Payments in respect of principal and interest
on the Certificates will be subordinated to payments on the
Notes to the extent described herein.
Each Class of Notes and the Certificates will be issued in
minimum denominations of $1,000 and will be available in
book-entry form only. Securityholders will be able to
receive Definitive Securities (as defined herein) only in
the limited circumstances described herein. See "CERTAIN
INFORMATION REGARDING THE SECURITIES--FORM, EXCHANGE,
REGISTRATION AND TITLE" herein.
B. Trust Property.......... The Trust Property consists of, among other things, the pool
of Initial Contracts together with any Subsequent Contracts
transferred to the Trust, and all rights, benefits,
obligations and proceeds arising therefrom or in connection
therewith, including security interests in the
Harley-Davidson (and, in certain limited instances, Buell)
motorcycles (the "MOTORCYCLES"; see "THE CONTRACTS--HARLEY-
DAVIDSON MOTORCYCLES") securing such Contracts and proceeds,
if any, from certain insurance policies with respect to
individual Motorcycles.
C. Distribution Dates...... Distributions of interest and principal on the Securities
will be made on the fifteenth day of each month (or, if such
day is not a Business Day, on the next succeeding Business
Day) (each, a "DISTRIBUTION DATE"), commencing [ ],
199[ ]. Payments on the Securities on each Distribution Date
will be paid to the holders of the related Securities who
are of record on the last Business Day immediately preceding
the calendar month in which such Distribution Date occurs
(each, a "RECORD DATE").
A "BUSINESS DAY" will be any day other than a Saturday, a
Sunday or a day on which banking institutions in Chicago,
Illinois or Wilmington, Delaware are authorized or obligated
by law, executive order or government decree to be closed.
To the extent not previously paid prior to such dates, the
outstanding principal amount of (i) the Class A-1 Notes will
be payable on the Distribution Date occurring in [ ]
(the "CLASS A-1 FINAL DISTRIBUTION DATE") and (ii) the Class
A-2 Notes will be payable on the Distribution Date occurring
in [ ] (the "CLASS A-2 FINAL DISTRIBUTION DATE" and,
together with the Class A-1 Final Distribution Date, the
"NOTE FINAL DISTRIBUTION DATES"). To the extent not
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previously paid in full prior to such date, the unpaid
principal balance of the Certificates will be payable on the
Distribution Date occurring in [ ] (the "CERTIFICATE
FINAL DISTRIBUTION DATE" and, together with the Note Final
Distribution Dates, the "FINAL DISTRIBUTION DATES").
Terms of the Notes........... The principal terms of the Notes will be as described below:
A. Interest Rates.......... The Class A-1 Notes will bear interest at the rate of [ ]%
per annum (the "CLASS A-1 RATE") and the Class A-2 Notes
will bear interest at the rate of [ ]% per annum (the
"CLASS A-2 RATE" and, together with the Class A-1 Rate, the
"INTEREST RATES").
B. Interest................ Interest on the outstanding principal amount of the Class
A-1 Notes and Class A-2 Notes will accrue at the related
Interest Rate from and including the fifteenth day of the
month of the most recent Distribution Date based on a
360-day year consisting of 12 months of 30 days each (or
from and including the Closing Date with respect to the
first Distribution Date) to but excluding the fifteenth day
of the month of the current Distribution Date (each, an
"INTEREST PERIOD"). Interest on the Notes for any
Distribution Date due but not paid on such Distribution Date
will be due on the next Distribution Date, together with, to
the extent permitted by applicable law, interest on such
shortfall at the related Interest Rate. See "DESCRIPTION OF
THE NOTES--PAYMENTS OF INTEREST" and "CERTAIN INFORMATION
REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE
SECURITIES."
C. Principal............... Principal of the Notes will be payable on each Distribution
Date in an amount generally equal to the Note Principal
Distributable Amount (as defined herein) for such
Distribution Date, calculated as described under "CERTAIN
INFORMATION REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE
SECURITIES -- DEPOSITS TO THE DISTRIBUTION ACCOUNTS;
PRIORITY OF PAYMENTS." On each Distribution Date, the Note
Principal Distributable Amount will be applied in the
following priority: first to reduce the principal amount of
the Class A-1 Notes to zero, and thereafter, to reduce the
principal amount of the Class A-2 Notes to zero.
Notwithstanding the foregoing, if the principal amount of
either the Class A-1 Notes or Class A-2 Notes has not been
paid in full prior to its related Note Final Distribution
Date, the Note Principal Distributable Amount for such Note
Final Distribution Date will be the unpaid principal amount
of such Class of Notes as of such Note Final Distribution
Date. See "DESCRIPTION OF THE NOTES -- PAYMENTS OF
PRINCIPAL."
D. Optional Redemption..... In the event of an Optional Purchase, the Class A-2 Notes
will be redeemed in whole, but not in part, at a redemption
price equal to the unpaid principal amount of the Class A-2
Notes plus accrued interest thereon at the related Interest
Rate. See "DESCRIPTION OF THE NOTES --OPTIONAL REDEMPTION."
E. Mandatory Redemption.... Under certain conditions, the Notes may be accelerated upon
the occurrence of an Event of Default under the Indenture.
See "THE NOTES --EVENTS OF DEFAULT."
F. Mandatory Special
Redemption............... The holders of Class A-1 Notes ("CLASS A-1 NOTEHOLDERS") and
Class A-2 Notes ("CLASS A-2 NOTEHOLDERS") will be prepaid in
part, without premium, on the Distribution Date on or
immediately following the last day of the Funding Period in
the event that any
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amount remains on deposit in the Pre-Funding Account after
giving effect to the purchase of all Subsequent Contracts,
including any such purchase on such date (a "MANDATORY
SPECIAL REDEMPTION"). The aggregate principal amount of
Class A-1 Notes and Class A-2 Notes to be prepaid will be an
amount equal to the amount then on deposit in the
Pre-Funding Account allocated pro rata; provided, however,
in the event the Mandatory Special Redemption Amount is less
than $[ ] such amount shall be allocated solely to the
Class A-1 Noteholders, pro rata.
Terms of the Certificates.... The principal terms of the Certificates will be as described
below:
A. Interest................ On each Distribution Date, the Owner Trustee or any paying
agent or paying agents as the Owner Trustee may designate
from time to time (each, a "PAYING AGENT", which initially
will be the Indenture Trustee) will distribute pro rata to
Certificateholders of record as of the related Record Date
accrued interest at the rate of [ ]% per annum (the
"PASS-THROUGH RATE") on the Certificate Balance (as defined
herein) as of the immediately preceding Distribution Date
(after giving effect to distributions of principal to be
made on such immediately preceding Distribution Date) or, in
the case of the first Distribution Date, the Initial
Certificate Balance. Interest in respect of a Distribution
Date will accrue from and including the Closing Date (in the
case of the first Distribution Date) or from and including
the fifteenth day of the month of the most recent
Distribution Date to but excluding the fifteenth day of the
month of the current Distribution Date based on a 360-day
year consisting of 12 months of 30 days each. Interest on
the Certificates for any Distribution Date due but not paid
on such Distribution Date will be due on the next
Distribution Date, together with, to the extent permitted by
applicable law, interest on such shortfall at the
Pass-Through Rate. See "DESCRIPTION OF THE
CERTIFICATES--DISTRIBUTIONS OF INTEREST" and "CERTAIN
INFORMATION REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE
SECURITIES."
The "CERTIFICATE BALANCE" will equal $[ ] (the "INITIAL
CERTIFICATE BALANCE") on the Closing Date and on any date
thereafter will equal the Initial Certificate Balance
reduced by all distributions of principal previously made in
respect of the Certificates. Distributions on the
Certificates will be subordinated to payments of interest
and principal on the Notes to the extent described under
"DESCRIPTION OF THE CERTIFICATES" and "CERTAIN INFORMATION
REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE
SECURITIES."
B. Principal............... No principal will be paid on the Certificates until the
Distribution Date on which the principal amounts of the
Class A-1 Notes and Class A-2 Notes have been reduced to
zero. On such Distribution Date and each Distribution Date
thereafter, principal of the Certificates will be payable in
an amount equal to the Certificate Principal Distributable
Amount (as defined herein) for such Distribution Date,
calculated as described under "CERTAIN INFORMATION REGARDING
THE SECURITIES -- DISTRIBUTIONS ON THE SECURITIES --
DEPOSITS TO THE DISTRIBUTION ACCOUNTS; PRIORITY OF
PAYMENTS." If not paid in full prior to the Certificate
Final Distribution Date, the remaining Certificate Balance,
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if any, will be payable on that date. See "THE CERTIFICATES
-- DISTRIBUTIONS OF PRINCIPAL."
C. Optional Prepayment..... In the event of an Optional Purchase, the Certificates will
be repaid in whole, but not in part, at a repayment price
equal to the Certificate Balance plus accrued interest
thereon at the Pass-Through Rate. See "DESCRIPTION OF THE
CERTIFICATES -- OPTIONAL PREPAYMENT."
Security for the
Securities.................. The principal security for the Securities will be as
described below:
A. The Contracts........... The Contracts will be fixed-rate, simple-interest
conditional sales contracts for Motorcycles, including any
and all rights to receive payments collected thereunder on
or after the related Cutoff Date and security interests in
the Motorcycles financed thereby.
On the Closing Date, the Trust Depositor will sell, transfer
and assign to the Trust pursuant to the Agreement, and the
Trust will pledge to the Indenture Trustee, pursuant to the
Indenture, Initial Contracts with an aggregate principal
balance of $[ ] as of [ ], 199 , (the "INITIAL
CUTOFF DATE"). Following the Closing Date, pursuant to the
Agreement, the Trust Depositor will be obligated, subject
only to the availability thereof, to sell, and the Trust
will be obligated to purchase and pledge subject to the
satisfaction of certain conditions set forth therein,
Subsequent Contracts from time to time during the Funding
Period (as defined below) having an aggregate principal
balance equal to $[ ], such amount being equal to the
amount on deposit in the Pre-Funding Account established
under the Indenture on the Closing Date. With respect to
each transfer of Subsequent Contracts to the Trust and the
simultaneous pledge of Subsequent Contracts to the Indenture
Trustee, the Trust Depositor will designate as a cutoff date
(each a "SUBSEQUENT CUTOFF DATE") the date as of which such
Subsequent Contracts are deemed sold to the Trust and
pledged to the Indenture Trustee. Each date on which
Subsequent Contracts are conveyed and pledged is referred to
herein as a "SUBSEQUENT TRANSFER DATE."
The Initial Contracts and the Subsequent Contracts will be
selected from retail Motorcycle installment sales contracts
in the Trust Depositor's portfolio based on the criteria
specified in the Transfer and Sale Agreement. The Contracts
arise and will arise from loans to Obligors located in the
50 states of the United States, the District of Columbia
[and other U.S. territories]. As of the Initial Cutoff Date,
the annual percentage rate of interest on the Initial
Contracts ranges from [ ]% to [ ]% with a weighted average
of approximately [ ]%. The Initial Contracts had a weighted
average term to scheduled maturity, as of origination, of
approximately [ ] months, and a weighted average term
to scheduled maturity, as of the Initial Cutoff Date, of
approximately [ ] months. The final scheduled
Distribution Date on the Initial Contract with the latest
maturity is no later than [ ]. No Contract (including
any Subsequent Contract) will have a scheduled maturity
later than [ , ]. The Contracts generally are or
will be prepayable at any time without penalty to the
Obligor. Following the transfer of Subsequent Contracts to
the Trust, the aggregate characteristics of the entire pool
of Contracts may vary from those of the Initial
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Contracts as to the criteria identified and described in
"THE CONTRACTS" herein.
B. The Reserve Fund........ The Securityholders will be afforded certain limited
protection, to the extent described herein, against losses
in respect of the Contracts by the establishment of an
account in the name of the Indenture Trustee for the benefit
of the Securityholders (the "RESERVE FUND").
The Reserve Fund will be created with an initial deposit by
the Trust Depositor of $[ ] (the "RESERVE FUND INITIAL
DEPOSIT") on the Closing Date. The funds in the Reserve Fund
will thereafter be supplemented on each Distribution Date by
the deposit of certain Excess Amounts and Subsequent Reserve
Fund Amounts (as defined herein) (such Excess Amounts and
Subsequent Reserve Fund Amounts, together with the Reserve
Fund Initial Deposit and the Certificate Reserve Amount as
defined herein, the "RESERVE FUND DEPOSITS")), until the
amount in the Reserve Fund reaches the Specified Reserve
Fund Balance (as defined herein). "EXCESS AMOUNTS" in
respect of a Distribution Date will be calculated as
described under "CERTAIN INFORMATION REGARDING THE
SECURITIES -- DISTRIBUTIONS ON THE SECURITIES -- DEPOSITS TO
THE DISTRIBUTION ACCOUNTS; PRIORITY OF PAYMENTS" and will
equal the funds on deposit in the Collection Account in
respect of such Distribution Date, after giving effect to
all distributions required to be made on such Distribution
Date from Available Monies (as defined herein). The
"SUBSEQUENT RESERVE FUND AMOUNT" will equal the amount on
each Subsequent Transfer Date equal to [ %] of the
aggregate balance of the Subsequent Contracts conveyed to
the Trust. The Specified Reserve Fund Balance for any
Distribution Date will be calculated as described under
"CERTAIN INFORMATION REGARDING THE SECURITIES -- PAYMENT
PRIORITIES OF THE NOTES AND THE CERTIFICATES; THE RESERVE
FUND." On each Distribution Date, funds will be withdrawn
from the Reserve Fund, up to the Available Amount (as
hereinafter defined), for distribution to Securityholders to
cover any shortfalls in interest and principal required to
be paid on the Securities.
In addition to the Reserve Fund Initial Deposit, the Trust
Depositor will deposit $[ ], (as further defined herein
the "CERTIFICATE RESERVE AMOUNT"), into the Reserve Fund on
the Closing Date. If funds in the Reserve Fund (other than
the Certificate Reserve Amount) are applied in accordance
with the last sentence of the preceding paragraph and are
insufficient to distribute the interest or principal due on
the Certificates, funds available from the Certificate
Reserve Amount will be withdrawn from the Reserve Fund and
applied solely to distribute interest or principal on the
Certificates. The Certificate Reserve Amount will not be
available to pay interest or principal on the Notes. The
"AVAILABLE AMOUNT" will equal the amount of all funds on
deposit in the Reserve Fund less the undistributed balance
of Certificate Reserve Amount, if any.
On each Distribution Date, after giving effect to all
distributions made on such Distribution Date, any amounts in
the Reserve Fund that are in excess of the Specified Reserve
Fund Balance will be allocated and distributed to the Trust
Depositor. See "CERTAIN INFORMATION
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REGARDING THE SECURITIES -- PAYMENT PRIORITIES OF THE NOTES
AND THE CERTIFICATES; THE RESERVE FUND."
C. Pre-Funding Account..... During the period (the "FUNDING PERIOD") from and including
the Closing Date until the earliest of (a) the Distribution
Date on which the amount on deposit in the Pre-Funding
Account is less than $[ ], (b) the date on which an
Event of Termination occurs with respect to the Servicer
under the Agreement, (c) the date on which certain events of
insolvency occur with respect to the Trust Depositor or (d)
the close of business on the date which is 90 days from and
including the Closing Date, the Pre-Funding Account will be
maintained as an account in the name of the Indenture
Trustee on behalf of the Noteholders to secure the Trust
Depositor's obligations under the Agreement to purchase and
transfer Subsequent Contracts to the Trust and the Trust's
obligations under the Indenture to pledge Subsequent
Contracts to the Indenture Trustee. The Pre-Funded Amount
will initially equal $[ ] and, during the Funding
Period, will be reduced by the amount thereof that the Trust
uses to purchase Subsequent Contracts from the Trust
Depositor and contemporaneously therewith from the Seller by
the Trust Depositor. The Trust Depositor expects that the
Pre-Funded Amount will be reduced to less than $[ ] by
the Distribution Date occurring in [ ] 199 . Any
Pre-Funded Amount remaining at the end of the Funding Period
will be payable to the Noteholders as described above in
"SUMMARY OF TERMS--MANDATORY SPECIAL REDEMPTION."
D. Interest Reserve
Account.................. The Trust Depositor will establish, and fund with an initial
deposit on the Closing Date, a separate collateral account
in the name of the Indenture Trustee on behalf of the
Securityholders under the Agreement (the "INTEREST RESERVE
ACCOUNT"), for the purpose of providing additional funds for
payment of Carrying Charges (as described below) to pay
certain distributions on Distribution Dates occurring during
(and on the first Distribution Date following the end of)
the Funding Period. In addition to the initial deposit, all
investment earnings with respect to the Pre-Funding Account
are to be deposited into the Interest Reserve Account and,
pursuant to the Agreement, on each Distribution Date
described above, amounts in respect of Carrying Charges from
such account will be transferred into the Collection
Account. "CARRYING CHARGES" means (i) the product of (x) the
weighted average of the Class A-1 Rate, the Class A-2 Rate
and the Pass-Through Rate and (y) the undisbursed funds
(excluding investment earnings) in the Pre-Funding Account
(as of the last day of the related Due Period as defined
herein) over (ii) the amount of any investment earnings on
funds in the Pre-Funding Account which was transferred to
the Interest Reserve Account, as well as interest earnings
on amounts in the Interest Reserve Account.
The Interest Reserve Account will be established to account
for the fact that a portion of the proceeds obtained from
the sale of the Notes will be initially deposited in the
Pre-Funding Account (as the initial Pre-Funded Amount)
rather than invested in Contracts, and the monthly
investment earnings on such Pre-Funded Amount (until the
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Pre-Funded Amount is used to purchase Subsequent Contracts)
are expected to be less than the weighted average of the
Class A-1 Rate, the Class A-2 Rate and the Pass-Through Rate
with respect to the corresponding portion of the Class A-1
Principal Balance, Class A-2 Principal Balance and the
Certificate Balance, as well as the amount necessary to pay
the Trustees' Fees. The Interest Reserve Account is not
designed to provide any protection against losses on the
Contracts in the Trust. After the Funding Period, money
remaining in the Interest Reserve Account will be released
to the Trust Depositor.
Optional Purchase............ The Seller, through the Trust Depositor may, but will not be
obligated to, purchase all of the Contracts in the Trust,
and thereby cause early retirement of all outstanding
Securities, on any Distribution Date as of which the Pool
Balance has declined to less than 10% of the Initial Pool
Balance (an "OPTIONAL PURCHASE"). See "CERTAIN INFORMATION
REGARDING THE SECURITIES -- TERMINATION."
Ratings...................... It is a condition of issuance that the Class A-1 Notes and
Class A-2 Notes be rated AAA by Standard & Poor's Ratings
Services, A Division of The McGraw-Hill Companies ("S&P")
and Aaa by Moody's Investors Service, Inc. ("MOODY'S" and,
together with S&P, the "RATING AGENCIES") and the
Certificates each be rated at least [ ] by S&P and
[ ] by Moody's. See "RATINGS OF THE SECURITIES."
Advances..................... The Servicer is obligated to advance each month an amount
equal to accrued and unpaid interest on the Contracts which
was delinquent with respect to the related Due Period (as
defined herein) (each an "ADVANCE"), but only to the extent
that the Servicer believes that the amount of such Advance
will be recoverable from collections on the Contracts. The
Servicer will be entitled to reimbursement of outstanding
Advances on any Distribution Date by means of a first
priority withdrawal of Available Monies (as defined herein)
then held in the Collection Account. See "CERTAIN
INFORMATION REGARDING THE SECURITIES--ADVANCES."
Mandatory Repurchase by the
Trust Depositor............. Under the Agreement, the Trust Depositor has agreed, in the
event of a breach of certain representations and warranties
made by the Trust Depositor and contained therein which
materially and adversely affects the Trust's interest in any
Contract and which has not been cured, to repurchase such
Contract within two business days prior to the first
Determination Date after the Trust Depositor becomes aware
of such breach. "DETERMINATION DATE" means the fourth
business day following the conclusion of a Due Period. The
Seller is obligated under the Transfer and Sale Agreement
(which right against the Seller the Trust Depositor has
assigned in such circumstances to the Trust) to repurchase
the Contracts from the Trust Depositor contemporaneously
with the Trust Depositor's purchase of the Contracts from
the Trust. See "CERTAIN INFORMATION REGARDING THE
SECURITIES--CONVEYANCE OF CONTRACTS."
Security Interests and Other
Aspects of the Contracts.... In connection with the establishment of the Trust as well as
the assignment, conveyance and transfer of Contracts
(including Subsequent Contracts) to the Trust and pledge to
the Indenture
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Trustee, security interests in the Motorcycles securing the
Contracts have been (or will be) (i) conveyed and assigned
by the Seller to the Trust Depositor pursuant to the
Transfer and Sale Agreement (and, in the case of Subsequent
Contracts, the related Subsequent Purchase Agreement as
defined therein and executed thereunder), (ii) conveyed and
assigned by the Trust Depositor to the Trust pursuant to the
Agreement (and, in the case of Subsequent Contracts, the
related Subsequent Transfer Agreement as defined herein and
executed thereunder) and (iii) pledged by the Trust to the
Indenture Trustee pursuant to the Indenture. The Agreement
will designate the Servicer as custodian to maintain
possession, as the Indenture Trustee's agent, of the
Contracts and any other documents relating to the
Motorcycles. Uniform Commercial Code financing statements
will be filed in both Nevada and Illinois, reflecting the
conveyance and assignment of the Contracts to the Trust
Depositor from the Seller, from the Trust Depositor to the
Trust and the pledge from the Trust to the Indenture
Trustee, and the Seller's and the Trust Depositor's
accounting records and computer systems will also reflect
such conveyance and assignment and pledge. To facilitate
servicing and save administrative costs, such documents will
not be segregated from other similar documents that are in
the Servicer's possession. However, the Contracts will be
stamped to reflect their conveyance and assignment and
pledge. If, however, though fraud, negligence or otherwise,
a subsequent purchaser were able to take physical possession
of the Contracts without notice of such conveyance and
assignment and pledge, the Trust's and Indenture Trustee's
interest in the Contracts could be defeated. In addition,
due to administrative burden and expense, the certificates
of title to the Motorcycles will not be amended or reissued
to reflect the conveyance and assignment of the Seller's
security interest in the Motorcycles related to the
Contracts to the Trust Depositor and the Trust or the pledge
to the Indenture Trustee. In the absence of amendments to
the certificates of title, the Trust and Indenture Trustee
will not have a perfected security interest in the
Motorcycles in some states. Further, federal and state
consumer protection laws impose requirements upon creditors
in connection with extensions of credit and collections on
conditional sales contracts, and certain of these laws make
an assignee of such a contract liable to the obligor thereon
for any violation of such laws by the lender. The Trust
Depositor has agreed to repurchase any Contract as to which
it has failed to perfect a security interest in the
Motorcycle securing such Contract, or as to which a breach
of federal or state laws exists if such breach materially
and adversely affects the Trust's interest in such Contract
and if such failure or breach has not been cured within 90
days. The Seller has entered into a corresponding obligation
to repurchase such Contracts from the Trust Depositor under
the Transfer and Sale Agreement and Subsequent Purchase
Agreements. See "SECURITY INTERESTS AND OTHER ASPECTS OF THE
CONTRACTS; REPURCHASE OBLIGATIONS."
Monthly Servicing Fee........ The Servicer will be entitled to receive for each Due Period
a monthly servicing fee (the "MONTHLY SERVICING FEE") equal
to 1/12th of
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[ %]of the Principal Balance of the Contracts as of the
beginning of such Due Period. The Servicer will also be
entitled to receive any extension fees or late payment
penalty fees paid by Obligors (collectively with the Monthly
Servicing Fee, the "SERVICING FEE"). The Servicing Fee is
payable prior to any payments to the Noteholders or the
Certificateholders. See "CERTAIN INFORMATION REGARDING THE
SECURITIES--SERVICING COMPENSATION AND PAYMENT OF EXPENSES."
Tax Status................... In the opinion of Winston & Strawn, federal tax counsel to
the Trust Depositor, for federal income tax purposes, the
Notes will be characterized as debt, and the Trust will not
be characterized as an association (or a publicly traded
partnership) taxable as a corporation. Each Noteholder, by
the acceptance of a Note, will agree to treat the Notes as
indebtedness, and each Certificateholder, by the acceptance
of a Certificate, will agree to treat the Trust as a
partnership in which the Certificateholders are partners for
federal income tax purposes. See "FEDERAL INCOME TAX
CONSEQUENCES."
ERISA Considerations......... Subject to the considerations discussed under "ERISA
CONSIDERATIONS"herein, the Notes will be eligible for
purchase by employee benefit plans. Any benefit plan
fiduciary considering purchase of the Notes should, however,
consult with its counsel regarding the consequences of such
purchase under ERISA and the Code. See "ERISA
CONSIDERATIONS."
The Certificates are not eligible for purchase by (i)
employee benefit plans subject to ERISA, or (ii) individual
retirement accounts and other retirement plans subject to
Section 4975 of the Code.
</TABLE>
14
<PAGE>
RISK FACTORS
THE CONTRACTS AND REINVESTMENT RISK ASSOCIATED WITH THE PRE-FUNDING ACCOUNT.
On the Closing Date, the Trust Depositor will transfer $[ ] of Initial Contracts
to the Trust, which Initial Contracts the Trust Depositor purchased from the
Seller using part of the proceeds of the Notes and Certificates sold to
investors. The Trust Depositor will transfer $[ ] (representing the Pre-Funded
Amount), pursuant to the Agreement, into the Pre-Funding Account established and
maintained in the name of the Indenture Trustee on behalf of the
Securityholders. Such pledge will secure the Trust's obligation to purchase from
the Trust Depositor and transfer to the Trust the Subsequent Contracts in a
principal amount equal to the initial Pre-Funded Amount at or before the end of
the Funding Period. If the Seller fails to originate a principal amount of
eligible Contracts during the Funding Period which is at least equal to the Pre-
Funded Amount, the Trust Depositor will be unable to acquire sufficient
Subsequent Contracts to transfer to the Trust on one or more Subsequent Transfer
Dates, thereby resulting in a Mandatory Special Redemption and prepayment of
principal to the Noteholders as described in the following paragraph. In
addition, any conveyance of Subsequent Contracts is subject to the satisfaction,
on or before the related Subsequent Transfer Date, of the following conditions,
among others: (i) each such Subsequent Contract satisfies the eligibility
criteria specified in the Transfer and Sale Agreement and the related Subsequent
Purchase Agreement executed thereunder; (ii) as of the applicable Subsequent
Cutoff Date, no Contract in the Trust, including the Subsequent Contracts that
the Trust Depositor will be conveying as of such Subsequent Cutoff Date, will
have a scheduled maturity date later than [ ]; (iii) the Trust Depositor shall
have executed and delivered in favor of the Trust a written assignment (a
"SUBSEQUENT TRANSFER AGREEMENT") conveying such Subsequent Contracts to the
Trust (including a schedule identifying such Subsequent Contracts); (iv) the
Trust Depositor shall have delivered certain opinions of counsel to the
Trustees, the Initial Purchaser and the Rating Agencies with respect to the
validity and other aspects of the conveyance of all such Subsequent Contracts
and (v) the Rating Agencies shall have each notified the Trust Depositor and the
Trustees in writing that, following the addition of such Subsequent Contracts,
the Class A-1 Notes and the Class A-2 Notes will be rated AAA by S&P and Aaa by
Moody's, and the Certificates will be rated at least [ ] by S&P and
[ ] by Moody's. Such confirmation of the ratings of the Class A-1 Notes and
the Class A-2 Notes and the Certificates may depend on factors other than the
characteristics of the Subsequent Contracts, including the delinquency,
repossession and net loss experience on the Contracts in the Trust. Also, there
can be no assurance that the Seller will continue to generate Motorcycle
conditional sales contracts that satisfy the criteria set forth in the Transfer
and Sale Agreement.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of Subsequent Contracts by the Trust
Depositor during the Funding Period, the Class A-1 Noteholders and Class A-2
Noteholders will receive, on the Distribution Date on or immediately following
the last day of the Funding Period, a prepayment of principal in an amount equal
to the amount remaining in the Pre-Funding Account pro rata; provided, however,
in the event the Mandatory Special Redemption Amount is less than $[ ] such
amount shall be allocated solely to the Class A-1 Noteholders. See also "RISK
FACTORS-- REINVESTMENT RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS AND COLLATERAL
REINVESTMENT ACCOUNTS" in the Prospectus. It is anticipated that even if the
Seller originates sufficient Subsequent Contracts to exhaust most of the
Pre-Funded Amount, the principal amount of Subsequent Contracts conveyed to the
Trust by the end of the Funding Period will not be exactly equal to the amount
on deposit in the Pre-Funding Account and that therefore there will be at least
a nominal amount of principal prepaid to the Class A-1 Noteholders at the end of
the Funding Period in any event.
Following the transfer of Subsequent Contracts to the Trust, the aggregate
characteristics of the entire pool of Contracts may vary from those of the
Initial Contracts as of the Initial Cutoff Date, as to the criteria described in
"THE CONTRACTS" below.
TRUST'S RELATIONSHIP TO THE TRUST DEPOSITOR AND SELLER. Neither the Seller
nor the Trust Depositor is generally obligated to make any payments in respect
of the Notes, Certificates or Contracts. However, in
15
<PAGE>
connection with each conveyance of Contracts by the Seller to the Trust
Depositor and by the Trust Depositor to the Trust, the Seller and the Trust
Depositor will make representations and warranties with respect to the
characteristics of such Contracts. In certain circumstances, the Seller through
the Trust Depositor is obligated to repurchase Contracts with respect to which
such representations or warranties are not true as of the date made. Neither the
Seller nor the Trust Depositor is otherwise obligated with respect to the Notes
or Certificates (other than in respect of the transfer of Subsequent Contracts
as described herein). See also "RISK FACTORS-- TRUST'S RELATIONSHIP TO
EAGLEMARK, THE TRUST DEPOSITORS, AND THEIR AFFILIATES" AND "--RISKS ASSOCIATED
WITH NON-RECOURSE NATURE OF THE SECURITIES" in the Prospectus.
SUBORDINATION; LIMITED ASSETS. SEE "CERTAIN INFORMATION REGARDING THE
SECURITIES--PAYMENT PRIORITIES OF THE NOTES AND CERTIFICATES; RESERVE FUND."
Principal and interest payments on the Certificates will be subordinated to
payments on the Notes as described herein. Accordingly, the yield on the
Certificates will be sensitive to the loss experience on the Contracts and the
timing of such losses. If the actual rate and amount of losses experienced on
the Contracts exceed the rate and amount of losses assumed by an investor, the
yield to maturity of the Certificates may be lower than anticipated.
The Trust will not have, nor is it expected to have, any significant assets
or sources of funds other than the Contracts and its rights under the Agreement,
including the Pre-Funding Account, Interest Reserve Account and the Reserve
Fund. Holders of the Securities must rely for repayment upon payments on the
Contracts and, if and to the extent available, amounts on deposit in the
Pre-Funding Account, the Interest Reserve Account and the Reserve Fund. The
Pre-Funding Account and the Interest Reserve Account will be available during
the Funding Period. The Pre-Funding Account will be used solely to purchase
Subsequent Contracts and is not available to cover losses on the Contracts. The
Interest Reserve Account is designed to cover obligations of the Trust relating
to that portion of the initial Note net proceeds not invested in Contracts, and
is not designed to provide any protection against losses on the Contracts.
LIMITED DELINQUENCY AND LOAN LOSS EXPERIENCE WITH MOTORCYCLE CONTRACTS.
Eaglemark was organized in January 1993 and began purchasing and servicing
conditional sales contracts for Motorcycles in February 1993. Accordingly, and
for other reasons, Eaglemark's delinquency experience and loan loss and
repossession experience set forth under "The Contracts" may not be indicative of
the performance of the Contracts sold to the Trust Depositor and held by the
Trust and pledged to the Indenture Trustee. The Trust Depositor is a special
purpose corporation established for the limited purpose of purchasing the
Contracts (and other similar retail motorcycle conditional sales contracts) and
related assets from the Seller, and selling the same into the Trust (and other
similar trusts); the Trust Depositor was organized in [ ] of [ ].
RISKS ASSOCIATED WITH GEOGRAPHIC CONCENTRATIONS OF CONTRACTS. [ ]% of the
aggregate principal balance of the Initial Contracts as of the Initial Cutoff
Date arise from loans to Obligors in [ ]. See generally "THE CONTRACTS" herein.
[ ] may have negative implications on repayments of the Contracts, including,
[ ].
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS. See generally "RISK
FACTORS--RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES" and
"--ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE ON ITS
SECURITY INTEREST IN THE MOTORCYCLES--BANKRUPTCY LAWS" and "ADDITIONAL LEGAL
LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE ON ITS SECURITY INTEREST
IN THE MOTORCYCLES--CONSUMER PROTECTION LAWS" in the Prospectus.
LIMITED LIQUIDITY. There is currently no secondary market for the
Securities offered hereby. The Underwriter currently intends to make a market in
the Securities, but it is under no obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the Securityholders with liquidity of investment
or that it will continue for the life of the Securities.
16
<PAGE>
COMPANY BANKRUPTCY CONSIDERATIONS. See generally "RISK FACTORS --COMPANY
BANKRUPTCY CONSIDERATIONS" in the Prospectus.
YIELD AND PREPAYMENT CONSIDERATIONS. See generally "RISK
FACTORS--PREPAYMENTS ON CONTRACTS AFFECT YIELD OF SECURITIES" in the Prospectus.
RISK ASSOCIATED WITH FAILURE OF OBLIGORS TO DESIGNATE PAYMENTS AS BEING
PAYMENTS ON THE CONTRACTS--JOINT ACCOUNTS. In certain circumstances, the
monthly billing statements relating to the Contracts and provided to the
Obligors also reflect the Obligors' outstanding "HARLEY CARD" monthly balance.
See "EAGLEMARK, INC.--GENERAL.". With respect to such a joint billing statement,
the Obligor sends one payment which if not appropriately designated by such
Obligor in the statement returned with their payment will be allocated first to
the minimum payment due on the Harley Card. To the extent a payment is
insufficient to cover payment amounts due under both the Contract and the
minimum amount due on the Harley Card, the Contract will suffer the associated
shortfall.
TAX STATUS. In the opinion of Winston & Strawn as federal income tax
counsel to the Trust Depositor, for federal income tax purposes, the Notes will
be characterized as debt and the Trust will not be characterized as an
association (or publicly traded partnership) taxable as a corporation. As no
cases, regulations or administrative rulings have addressed transactions similar
to those described herein, however, there can be no assurance the IRS or a court
will not take contrary positions. See "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS."
FORMATION OF THE TRUST
GENERAL
The Trust will be a business trust formed under the laws of the State of
Delaware pursuant to the Trust Agreement for the transactions described herein.
After its formation, the Trust will not engage in any activity other than (i)
acquiring, holding and managing the Contracts and the other assets of the Trust
and proceeds therefrom; (ii) issuing the Notes and the Certificates; (iii)
making payments on the Notes and the Certificates; and (iv) engaging in other
activities that are necessary, suitable or convenient to accomplish the
foregoing purposes or are incidental thereto or connected therewith.
On the Closing Date, the Trust Depositor will sell and assign the Trust
Property to the Trust. Eaglemark will act as Servicer of the Contracts and will
receive compensation and fees for such services. See "CERTAIN INFORMATION
REGARDING THE SECURITIES -- SERVICING COMPENSATION AND PAYMENT OF EXPENSES."
The Trust's principal offices will be in Wilmington, Delaware, in care of
Wilmington Trust Company, as Owner Trustee, at the address listed below under
"THE OWNER TRUSTEE."
CAPITALIZATION
The Trust will initially be capitalized with equity equal to the Initial
Certificate Balance. The Trust Depositor will purchase Certificates with an
Initial Certificate Balance of approximately 1% of the Initial Certificate
Balance and the remaining equity interests will be sold to third party investors
that are expected to be unaffiliated with the Seller, the Trust Depositor, the
Servicer, the Trust Depositor or the Trust.
17
<PAGE>
The following table illustrates the capitalization of the Trust as of the
Cut-Off Date, as if the issuance and sale of the Securities had taken place, on
such date:
<TABLE>
<S> <C>
Class A-1 Notes................................................. $ [ ]
Class A-2 Notes................................................. $ [ ]
Certificates.................................................... $ [ ]
Total........................................................... $ [ ]
</TABLE>
THE OWNER TRUSTEE
Wilmington Trust Company will be the Owner Trustee under the Trust
Agreement. Wilmington Trust Company is a Delaware corporation and its Corporate
Trust Office is located at 1100 North Market Street, Wilmington, Delaware 19890.
The Owner Trustee will have the rights and duties set forth herein under
"CERTAIN INFORMATION REGARDING THE SECURITIES -- THE TRUSTEES" and "-- DUTIES OF
THE TRUSTEES."
POOL FACTORS AND TRADING INFORMATION
The "NOTE POOL FACTOR" for each Class of Notes will be a six-digit decimal
which the Servicer will compute prior to each Distribution Date with respect to
the Notes indicating the unpaid principal amount of such Class of Notes, after
giving effect to payments to be made on such Distribution Date, as a fraction of
the initial outstanding principal amount of such Class of Notes. The
"CERTIFICATE POOL FACTOR" for the Certificates will be a six-digit decimal which
the Servicer will compute prior to each Distribution Date indicating the
remaining Certificate Balance after giving effect to distributions to be made on
such Distribution Date, as a fraction of the Initial Certificate Balance. Each
Note Pool Factor and the Certificate Pool Factor will be 1.000000 as of the
Closing Date, and thereafter will decline to reflect reductions in the
outstanding principal amount of the applicable Class of Notes, or the reduction
of the Certificate Balance, as the case may be. A Noteholder's portion of the
aggregate outstanding principal amount of the related Class of Notes will be the
product of (i) the original denomination of such Noteholder's Notes and (ii) the
applicable Note Pool Factor at the time of determination. A Certificateholder's
portion of the aggregate outstanding Certificate Balance will be the product of
(i) the original denomination of such Certificateholder's Certificate and (ii)
the Certificate Pool Factor at the time of determination.
The Noteholders will receive reports on or about each Distribution Date
concerning payments received on the Contracts, the Pool Balance, each Note Pool
Factor and various other items of information, and the Certificateholders will
receive reports on or about each Distribution Date concerning payments received
on the Contracts, the Pool Balance, the Certificate Pool Factor and various
other items of information. In addition, Securityholders of record during any
calendar year will be furnished information for tax reporting purposes not later
than the latest date permitted by law. See "CERTAIN INFORMATION REGARDING THE
SECURITIES -- STATEMENTS TO SECURITYHOLDERS."
USE OF PROCEEDS
The Trust Depositor will use the net proceeds received from the sale of the
Notes and Certificates (i) for the purchase of the Initial Contracts and related
assets from the Seller, and (ii) the remainder for the funding of the
Pre-Funding Account. The Seller will use the net proceeds from the Trust
Depositor's purchase of the Initial Contracts, as well as Subsequent Contracts,
for the repayment of a substantial portion of the outstanding principal of the
warehouse lines through which it finances its motorcycle conditional sales
contracts. Following each such repayment, it is expected that the warehouse
lines will be used to build a new portfolio of Motorcycle conditional sales
contracts.
18
<PAGE>
THE CONTRACTS
Each Contract is (or will be, in the case of Subsequent Contracts) secured
by a Motorcycle (as described below) and is (or will be) a conditional sales
contract originated by a Harley-Davidson dealer and purchased by the Trust
Depositor. No Contract may be substituted by the Seller or the Trust Depositor
with another Motorcycle contract after such Contract has been sold by the Trust
Depositor to the Trust.
Each Contract (a) is (or will be) secured by a Motorcycle, (b) has (or will
have) a fixed annual percentage rate and provide for, if timely made, payments
of principal and interest which fully amortize the loan on a simple interest
basis over its term, (c) with respect to the Initial Contracts, has its last
scheduled payment due no later than [ , ], and with respect to the
Contracts as a whole (including any Subsequent Contracts conveyed to the Trust
after the Closing Date), will have a last scheduled payment due no later than
[ ], and (d) with respect to the Initial Contracts, has its first
scheduled payment due no later than [ ]. The Contracts were (or will
be) acquired by the Trust Depositor in the ordinary course of the Trust
Depositor's business. A detailed listing of the Initial Contracts is appended to
the Agreement. See "DESCRIPTION OF THE CERTIFICATES" below. (For general
composition of the Initial Contracts see Table 1 below). Approximately [ ]%
of the Principal Balance of the Initial Contracts as of the Initial Cutoff Date
is attributable to loans to purchase Motorcycles which were new and
approximately [ ]% is attributable to loans to purchase Motorcycles which
were used at the time the related Contract was originated. All Initial Contracts
have a contractual rate of interest of at least [ ]% per annum and not more
than [ ]% per annum and the weighted average contractual rate of interest
of the Initial Contracts as of the Initial Cutoff Date is approximately
[ ]% per annum (see Table 2 below). The Initial Contracts have remaining
maturities as of the Initial Cutoff Date of at least [ ] months but not
more than [ ] months and original maturities of at least [ ] months
but not more than [ ] months. The Initial Contracts had a weighted average
term to scheduled maturity, as of origination, of approximately [ ] months,
and a weighted average term to scheduled maturity as of the Initial Cutoff Date
of approximately [ ] months (see Tables 3 and 4 below). The average
principal balance per Initial Contract as of the Initial Cutoff Date was
approximately $[ ] and the principal balances on the Initial Contracts as
of the Initial Cutoff Date ranged from $[ ] to $[ ] (see Table 5
below). The Contracts arise (or will arise) from loans to Obligors located in 50
states , the District of Columbia and other territories and with respect to the
Initial Contracts, constitute the following approximate amounts expressed as a
percentage of the aggregate principal balances on the Initial Contracts as of
the Initial Cutoff Date: [ ]% in the state of [ ], [ ]% in [ ], [ ]% in
[ ], [ ]% in [ ], [ ]% in [ ], [ ]% in [ ], [ ]% in [ ], [ ]% in [ ],
and [ ]% in [ ] (see Table 6 below). No other state represented more than
[ ]% of the Initial Contracts.
Except for the criteria described in the preceding paragraph and under "RISK
FACTORS--THE CONTRACTS AND THE PRE-FUNDING ACCOUNT," there will be no required
characteristics of the Subsequent Contracts. Therefore, following the transfer
of the Subsequent Contracts to the Trust, the aggregate characteristics of the
entire pool of the Contracts, including the composition of the Contracts, the
distribution by define of the Contracts, the distribution by calculated
remaining term of the Contracts, the distribution by original term to maturity
of the Contracts, the distribution by current balance of the Contracts, and the
geographic distribution of the Contracts, described in the following tables, may
vary from those of the Initial Contracts as of the Initial Cutoff Date.
The motorcycle dealer agreements between each of the originating dealers and
the Seller require the originating dealer to repurchase certain motorcycles
repossessed by the Seller in the event of a default by the Obligor ("DEALER
RECOURSE"); the Dealer Recourse will be assigned by the Seller to the Trust
Depositor pursuant to the Transfer and Sale Agreement, assigned from the Trust
Depositor to the Trust pursuant to the Agreement and pledged from the Trust to
the Indenture Trustee pursuant to the Indenture. There can be no assurance that
an originating dealer will perform its Dealer Recourse obligations under such
motorcycle dealer agreements if and when required to do so.
19
<PAGE>
TABLE 1
COMPOSITION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<S> <C>
Aggregate Principal Balance....................... $[ ]
Number of Contracts............................... [ ]
Average Principal Balance......................... $[ ]
Weighted Average Annual Percentage
Rate ("APR").................................... [ ]%
(Range)......................................... [ ]% to [ ]%
Weighted Average Original Term.................... [ ]
(Range)......................................... [ ] to [ ]
Weighted Average Calculated Remaining Term........ [ ]
(Range)......................................... [ ] to [ ]
</TABLE>
20
<PAGE>
TABLE 2
DISTRIBUTION BY APR OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF NUMBER TOTAL OUTSTANDING PERCENT OF
RATE CONTRACTS OF CONTRACTS (1) PRINCIPAL BALANCE POOL BALANCE (1)
- --------------------------------------- -------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
8.01- 9.00%...........................
9.01-10.00............................
10.01-11.00............................
11.01-12.00............................
12.01-13.00............................
13.01-14.00............................
14.01-15.00............................
15.01-16.00............................
16.01-17.00............................
Totals:............................ 100.00% 100.00%
</TABLE>
- ------------------------
(1) Percentages may not add to 100.00% because of rounding.
21
<PAGE>
TABLE 3
DISTRIBUTION BY CALCULATED REMAINING TERM
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL PERCENT
PERCENT OF OUTSTANDING OF
CALCULATED REMAINING NUMBER OF NUMBER OF PRINCIPAL POOL BALANCE
TERM (MONTHS) CONTRACTS CONTRACTS (1) BALANCE (1)
- ----------------------------------------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
0--12....................................
13--24...................................
25--36...................................
37--48...................................
49--60...................................
61--72...................................
totals:.................................. 100.00% 100.00%
</TABLE>
- ------------------------
(1) Percentages may not add to 100.00% because of rounding.
22
<PAGE>
TABLE 4
DISTRIBUTION BY ORIGINAL TERM TO MATURITY
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL PERCENT
PERCENT OF OUTSTANDING OF
CALCULATED REMAINING NUMBER OF NUMBER OF PRINCIPAL POOL BALANCE
TERM (MONTHS) CONTRACTS CONTRACTS (1) BALANCE (1)
- ----------------------------------------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
0--12....................................
13--24...................................
25--36...................................
37--48...................................
49--60...................................
61--72...................................
totals:.................................. 100.00% 100.00%
</TABLE>
- ------------------------
(1) Percentages may not add to 100.00% because of rounding.
23
<PAGE>
TABLE 5
DISTRIBUTION BY CURRENT BALANCE OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF POOL
CURRENT BALANCE CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1)
- ---------------------------------- ------------- ---------------- --------------------- --------------------
<S> <C> <C> <C> <C>
$0.01--1,000.00
$1,000.01--2,000.00
$2,000.01--3,000.00
$3,000.01--4,000.00
$4,000.01--5,000.00
$5,000.01--6,000.00
$6,000.01--7,000.00
$7,000.01--8,000.00
$8,000.01--9,000.00
$9,000.01--10,000.00
$10,000.01--11,000.00
$11,000.01--12,000.00
$12,000.01--13,000.00
$13,000.01--14,000.00
$14,000.01--15,000.00
$15,000.01--16,000.00
$16,000.01--17,000.00
$17,000.01--18,000.00
$18,000.01--19,000.00
$19,000.01--20,000.00
$20,000.01--21,000.00
$21,000.01--22,000.00
$22,000.01--23,000.00
$23,000.01--24,000.00
$25,000.01--26,000.00
$27,000.01--28,000.00
totals:........................... 100.00%
</TABLE>
- ------------------------
(1) Percentages may not add to 100.00% because of rounding.
24
<PAGE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OUTSTANDING
STATE NUMBER OF CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE
- ------------------------------------- -------------------- ------------- -------------------------
<S> <C> <C> <C>
Alaska...............................
Alabama..............................
Arkansas.............................
Arizona..............................
California...........................
Colorado.............................
Connecticut..........................
District of Columbia.................
Delaware.............................
Florida..............................
Georgia..............................
Hawaii...............................
Iowa.................................
Idaho................................
Illinois.............................
Indiana..............................
Kansas...............................
Kentucky.............................
Louisana.............................
Massachusetts........................
Maryland.............................
Maine................................
Michigan.............................
Minnesota............................
Missouri.............................
Mississippi..........................
Montana..............................
North Carolina.......................
North Dakota.........................
Nebraska.............................
New Hampshire........................
New Jersey...........................
New Mexico...........................
Nevada...............................
New York.............................
Ohio.................................
Oklahoma.............................
Oregon...............................
Pennsylvania.........................
Rhode Island.........................
South Carolina.......................
South Dakota.........................
Tennessee............................
Texas................................
</TABLE>
25
<PAGE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OUTSTANDING
STATE NUMBER OF CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE
- ------------------------------------- -------------------- ------------- -------------------------
<S> <C> <C> <C>
Utah.................................
Virginia.............................
Vermont..............................
Washington...........................
Wisconsin............................
West Virginia........................
Wyoming..............................
Other................................
Totals:.............................. 100.00% 100.00%
</TABLE>
- ------------------------
(1) Percentages may not add to 100.00% because of rounding.
26
<PAGE>
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
The Seller was organized in January 1993 and is a one hundred percent owned
subsidiary of Eaglemark Financial. The Seller began purchasing and servicing
conditional sales contracts for Motorcycles in February 1993. Accordingly, the
Seller has not accumulated a significant amount of delinquency and loss data on
Motorcycle conditional sales contracts similar to the Contracts. See "RISK
FACTORS -- LIMITED EXPERIENCE WITH MOTORCYCLE CONTRACTS."
The following tables set forth the delinquency experience and loan loss and
repossession experience of the Seller's portfolio of conditional sales contracts
for Motorcycles since the Seller began purchasing and servicing such contracts.
These figures include data in respect of contracts which the Seller has
previously sold with respect to prior securitizations and for which the Seller
acts as servicer.
DELINQUENCY EXPERIENCE
(UNAUDITED)
(DOLLARS IN THOUSANDS)
AT
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, [ ]
1994 1995 1996
-------------- -------------- -----------------
<S> <C> <C> <C>
Number of Motorcycle conditional sales contracts and associated
outstanding principal dollar balances (1)........................
Period of delinquency and associated outstanding principal balances
(2)..............................................................
30-59 days
60-89 days
90 days or more
Total number of delinquent motorcycle conditional sales
contracts........................................................
Delinquent Motorcycle conditional sales contracts as a percent of
total number of Motorcycle conditional sales contracts...........
Aggregate principal balance of delinquent Motorcycle conditional
sales contracts..................................................
Aggregate principal balance of delinquent Motorcycle conditional
sales contracts as a percentage of the aggregate outstanding
principal balance of Motorcycle conditional sales contracts......
</TABLE>
- ------------------------
(1) Excludes Contracts already in repossession, which Contracts the Servicer
does not consider outstanding.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a Contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month. Obligors do not receive initial statements until 60
days after the origination of their Contracts; therefore, the Obligors'
associated nonpayment is not considered for delinquency experience until
after the end of such 60-day period.
27
<PAGE>
LOAN LOSS/REPOSSESSION EXPERIENCE
(UNAUDITED)
(ACTUAL DOLLARS)
<TABLE>
<CAPTION>
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31, [ ] MONTHS ENDED [
1994 1995 1996 [ ], 1996
-------------------- -------------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
principal balance of all
motorcycle conditional
contracts serviced (1).......
contract liquidations (2).....
net losses: dollars (3).......
percentage (4)................
</TABLE>
- ------------------------
(1) As of period end. Includes Contracts already in repossession.
(2) As a percentage of the total number of Contracts being serviced as of period
end, calculated on an annualized basis.
(3) The calculation of net loss includes actual charge-offs, deficiency balances
remaining after liquidation of repossessed vehicles and expenses of
repossession and liquidation, net of recoveries.
(4) As a percentage of the principal amount of Contracts being serviced as of
period end, calculated on an annualized basis.
THE DATA PRESENTED IN THE FOREGOING TABLES ARE FOR ILLUSTRATIVE PURPOSES ONLY
AND THERE IS NO ASSURANCE THAT THE DELINQUENCY, LOAN LOSS OR REPOSSESSION
EXPERIENCE OF THE CONTRACTS WILL BE SIMILAR TO THAT SET FORTH ABOVE.
28
<PAGE>
HARLEY-DAVIDSON MOTORCYCLES
All of the motorcycles securing Contracts were manufactured by
Harley-Davidson, Inc., except not more than 2.5% of the Contracts (including all
Subsequent Contracts) relate to, and are secured by, motorcycles manufactured by
Buell. Buell produces "PERFORMANCE" motorcycles using engines and certain other
parts manufactured by Harley-Davidson. Harley-Davidson, as of December 31, 1996,
owned 49% of the voting equity of Buell.
Harley-Davidson produces and sells premium superheavyweight motorcycles.
Within the superheavyweight class, Harley-Davidson sells touring motorcycles
(equipped for long-distance touring), as well as motorcycles which emphasize the
distinctive styling associated with certain classic Harley-Davidson motorcycles.
Harley-Davidson motorcycles are based on variations of five basic chassis
designs and are powered by one of three air cooled, twin cylinder engines of "V"
configuration which have displacements of 883cc, 1200cc, and 1340cc.
Harley-Davidson manufactures its own engines and frames and is the only major
manufacturer of motorcycles in the United States.
Buell produces "PERFORMANCE" motorcycles using Harley-Davidson 1200cc
engines that are further modified in the manufacturing process, as well as
certain other Harley parts. The "PERFORMANCE" aspect of the motorcycles refers
to overall handling characteristics of the motorcycle, including cornering,
acceleration and braking. Buell motorcycles and related products are currently
distributed exclusively through Harley-Davidson dealers. Buell's overall share
of the "PERFORMANCE" market is negligible.
As of December 31, 1996, Eaglemark has originated Contracts with principal
balances outstanding equal to approximately $ which are related to, and
secured by, "touring cycles", and $ which are related to, and secured
by, "street legal" cycles. "Touring cycles" (with displacements typically over
750cc) are generally intended for use in long distance travel, and "street legal
cycles" include all other motorcycles which may be licensed for street use under
applicable state or local law and which are not generally viewed as falling with
the "touring cycle" category.
YIELD AND PREPAYMENT CONSIDERATIONS
By their terms, the Contracts may be prepaid, in whole or in part, at any
time and each Contract contains a provision which permits the Seller to require
full prepayment in the event of a sale of the Motorcycle securing a Contract. In
addition, repurchases of the Contracts from the Trust by the Trust Depositor,
and concurrently from the Trust Depositor by the Seller, could occur in the
event of a breach of certain representation and warranties with respect to the
Contracts and upon exercise of the Trust Depositor's limited option to
repurchase the Contracts from the Trust when the Pool Balance has declined to
less than 10% of the Initial Pool Balance. Any prepayments and repurchases of
Contracts will reduce the average life of the Notes and Certificates and the
interest received by the Securityholders over the life of the Notes and
Certificates (for this purpose the term "PREPAYMENT" includes liquidations due
to default, as well as receipt of proceeds from credit life, credit disability
and casualty insurance policies). In addition, the occurrence of a Mandatory
Special Redemption at or before the end of the Funding Period would have the
effect of reducing the interest received by Noteholders over the life of the
Notes.
Payments on the Certificates will be subordinated to payments on the Notes.
Accordingly, the yield on the Certificates will be sensitive to the loss
experience on the Contracts and the timing of such losses. If the actual rate
and amount of losses experienced on the Contracts exceed the rate and amount of
losses assumed by an investor, the yield to maturity of the Certificates may be
lower than anticipated.
The final scheduled Distribution Date on the Initial Contract with the
latest maturity is no later than [ ]. The final scheduled Distribution
Date on the Contract with the latest maturity among the Contracts as a whole,
including any Subsequent Contracts, will be not later than [ ].
29
<PAGE>
EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC.
EAGLEMARK FINANCIAL SERVICES, INC.
Eaglemark Financial was formed in June 1992 with a capital infusion of
$10,000,000 from Harley-Davidson and an additional $15,000,000 capital
contribution from a major institutional investor in January 1993. In November
1995, Harley-Davidson purchased the equity owned by the major institutional
investor and as a result Eaglemark Financial is a 97% owned subsidiary of
Harley-Davidson. The business of Eaglemark Financial, through its 100% ownership
of Eaglemark, has been to provide wholesale and retail financing, credit card
and insurance services to dealers and customers of Harley-Davidson.
EAGLEMARK, INC.
Eaglemark is a Nevada corporation and is a wholly-owned subsidiary of
Eaglemark Financial. Eaglemark began operations in January 1993 when it
purchased the $85 million wholesale financing portfolio of certain
Harley-Davidson dealers from ITT Commercial Finance; subsequently, Eaglemark
entered the retail consumer finance business. Eaglemark provides financing to
Harley-Davidson customers for new and used motorcycles and Harley-Davidson
branded products including accessories through its private-label "HARLEY CARD,"
as well as a range of motorcycle insurance products through a wholly-owned
subsidiary. Eaglemark also finances extended service contracts on Motorcycles.
Eaglemark's financing, credit card and insurance programs are designed to work
together as a package that appeals to the needs of Harley-Davidson's customers.
The intent of such a package is to increase dealer and customer loyalty to
Eaglemark while improving revenue and profits over time. Eaglemark's principal
executive offices are located at 4150 Technology Way, Carson City, Nevada 89706
(telephone 702/885-1200). As of December 31, 1996, Eaglemark had total assets of
$339.9 million, and stockholder's equity of $50.9 million.
During the third quarter of 1994, Eaglemark began providing retail consumer
financing for other product lines. Initially, Eaglemark provided financing for
marine boat dealers under the trade names "MASTERCRAFT CREDIT," "WETJET CREDIT,"
"SKEETER CREDIT," "BOSTON WHALER FINANCIAL SERVICES," and "MARIAH FINANCIAL
SERVICES." Eaglemark has since added new lines of consumer financing including
(i) recreational vehicle financing through RV dealers under the trade name of
"HOLIDAY RAMBLER CREDIT"; (ii) Motorcycle financing through the Canadian
Harley-Davidson dealers transacted under the trade name "DEELEY CREDIT"; and
(iii) single-engine aircraft financing provided directly through Mooney Aircraft
under the trade name "MOONEY FINANCIAL SERVICES" or through a broker (Sterling
Air) under the Eaglemark name. Eaglemark also provides other forms of consumer
financing through various Dealers on a case-by-case basis. As of December 31,
1996, accounts receivable related to these new product lines represented less
than 23.9% of total retail receivables serviced by Eaglemark.
30
<PAGE>
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
The Trust Depositor is a special purpose corporation incorporated in the
State of Nevada in [ ]. All of the common stock of the Trust
Depositor is owned by the Seller. All of the officers and directors of the Trust
Depositor are employed by the Seller, except that two directors of the Trust
Depositor are required to be independent of the Trust Depositor. The Trust
Depositor's business is limited to purchasing the Contracts and related assets
(and other similar retail motorcycle installment conditional sales contracts)
from the Seller, acting as the general partner of the Trust and other similar
trusts and performing the obligations described in the Agreement and the
Transfer and Sale Agreement (as well as similar agreements entered into in
connection with the formation of similar trusts).
31
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
THE NOTES WILL BE ISSUED PURSUANT TO THE INDENTURE.
Citations to the relevant Sections of the Indenture appear below and under
"CERTAIN INFORMATION REGARDING THE SECURITIES" in parentheses.
PAYMENTS OF INTEREST
Interest on the outstanding principal amount of each Class of Notes will
accrue at the applicable Interest Rate from and including the fifteenth day of
the month of the most recent Distribution Date based on a 360-day year
consisting of 30 days each (or from and including the Closing Date with respect
to the first Distribution Date) to but excluding the fifteenth day of the month
of the current Distribution Date. If acceleration of the Notes is waived on
default, interest accrued but not paid on any Distribution Date will be due on
the immediately succeeding Distribution Date, together with, to the extent
permitted by applicable law, interest on such shortfall at the related Interest
Rate. Interest payments on the Notes will be made from Available Monies after
all accrued and unpaid Servicing Fees, Trustees' Fees and other administrative
fees of the Trust (collectively, "TRUST FEES AND EXPENSES") have been paid. See
"CERTAIN INFORMATION REGARDING THE SECURITIES--DISTRIBUTIONS ON THE
SECURITIES--DEPOSITS TO THE DISTRIBUTION ACCOUNTS; PRIORITY OF PAYMENTS."
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders, to the extent described
below, on each Distribution Date in an amount equal to the Note Percentage of
the related Note Principal Distributable Amount, in each case calculated as
described under "CERTAIN INFORMATION REGARDING THE SECURITIES-- DISTRIBUTIONS ON
THE SECURITIES--DEPOSITS TO THE DISTRIBUTION ACCOUNTS; PRIORITY OF PAYMENTS."
Principal payments on the Notes will be made from Available Monies after all
Trust Fees and Expenses have been paid, and after distribution of the Note
Interest Distributable Amount. See "CERTAIN INFORMATION REGARDING THE
SECURITIES--DISTRIBUTIONS ON THE SECURITIES--DEPOSITS TO THE DISTRIBUTION
ACCOUNTS, PRIORITY OF PAYMENTS."
Principal payments on the Notes will be applied on each Distribution Date
from the Note Distribution Account as follows: first to the holders of the Class
A-1 Notes until the principal amount of the Class A-1 Notes has been reduced to
zero but in no event later than the Class A-1 Final Distribution Date and second
to the holders of the Class A-2 Notes until the principal amount of the Class
A-2 Notes has been reduced to zero but in no event later than the Class A-2
Final Distribution Date.
To the extent that the Principal Distributable Amount is greater than the
principal balance of the Class A-1 Notes on any Distribution Date, the Principal
Distributable Amount will first be allocated to reduce the principal amount of
the Class A-1 Notes to zero and will thereafter be allocated to the Class A-2
Notes.
The principal amount of each class of Notes, to the extent not previously
paid, will be due on the related Note Final Distribution Date for that class of
Notes. The actual date on which the aggregate outstanding principal amount of
any class of Notes is paid may be earlier than its Note Final Distribution Date
based on a variety of factors, including the factors described under "CERTAIN
INFORMATION REGARDING THE SECURITIES--PREPAYMENT CONSIDERATIONS."
32
<PAGE>
OPTIONAL REDEMPTION
The Class A-2 Notes will be subject to redemption in whole, but not in part,
on any Distribution Date relating to an Optional Purchase. The redemption price
will equal the unpaid principal amount of the Class A-2 Notes plus accrued
interest thereon at the applicable Interest Rate.
MANDATORY SPECIAL REDEMPTION
The Class A-1 Noteholders and Class A-2 Noteholders will be prepaid in part
pursuant to a Mandatory Special Redemption, without premium, on the Distribution
Date on or immediately following the last day of the Funding Period in the event
that any amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Contracts, including any such purchase
on such date. The aggregate principal amount of Class A-1 Notes and Class A-2
Notes to be prepaid will be an amount equal to the amount then on deposit in the
Pre-Funding Account allocated pro rata; PROVIDED, HOWEVER, in the event the
Mandatory Special Redemption Amount is less than [$ ] such amount shall be
allocated solely to the Class A-1 Noteholders.
THE INDENTURE TRUSTEE
Harris Trust and Savings Bank will be the Indenture Trustee. The Indenture
Trustee is an Illinois banking corporation and its Corporate Trust Office is
located at 311 West Monroe Street, Chicago, Illinois 60603.
The Indenture Trustee will have the rights and duties set forth under
"CERTAIN INFORMATION REGARDING THE SECURITIES--THE TRUSTEES" and "--DUTIES OF
THE TRUSTEES."
EVENTS OF DEFAULT
"EVENTS OF DEFAULT" under the Indenture will consist of: (i) a default by
the Trust for five days or more in the payment of any interest on the Notes of
any class when the same becomes due and payable; (ii) a default by the Trust in
the payment of the principal of or any installment of the principal of the Notes
of any class when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the Trust made in the
Indenture or any representation or warranty made by the Trust in the Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect in a material respect as of the time made, and the
continuation of any such default for a period of 30 days after notice thereof is
given to the Trust by the Indenture Trustee or to the Trust and the Indenture
Trustee by the holders of Notes evidencing at least 25% of the voting interest
thereof, voting together as a single class and (iv) certain events of
bankruptcy, insolvency, receivership or liquidation relating to the Trust (each,
a "TRUST INSOLVENCY").
Upon the occurrence and continuation of an Event of Default, the Notes shall
become immediately due and payable at par, together with accrued interest
therein unless holders of Notes evidencing at least 66 2/3% of the voting
interests thereof, voting together as a single class, waive such an Event of
Default.
No sale or liquidation of the property of the Trust may be made if the
proceeds thereof are not sufficient to pay all outstanding principal of and
accrued interest on the Notes, unless (a) holders of Notes evidencing 100% of
the voting interests thereof, voting together as a single class, consent to such
sale or liquidation, or (b)(1) the Indenture Trustee determines that the
property of the Trust will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes, (2) the Indenture Trustee
provides prior written notice of such sale or liquidation to each Rating Agency
and (3) holders of Notes evidencing 66 2/3% of the voting interests thereof,
voting together as a single class, consent to such sale or liquidation.
33
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Trust Agreement. Copies of
the Trust Agreement (without exhibits) may be obtained by holders of
Certificates upon request in writing to the Owner Trustee at its Corporate Trust
Office. The Certificates may not be purchased by pension trusts. See "ERISA
CONSIDERATIONS" below.
DISTRIBUTIONS OF INTEREST
Interest on the Certificate Balance will accrue at the Pass-Through Rate
from and including the fifteenth day of the month of the most recent
Distribution Date based on a 360-day year consisting of 30 days each (or from
and including the Closing Date with respect to the first Distribution Date) to
but excluding the fifteenth day of the month of the current Distribution Date.
Interest accrued but not paid on any Distribution Date will be due on the
immediately succeeding Distribution Date, together with, to the extent permitted
by applicable law, interest on such amount at the Pass-Through Rate. Interest
distributions with respect to the Certificates will be made from Available
Interest after all Trust Fees and Expenses have been paid and after the Note
Distributable Amount has been distributed. See "CERTAIN INFORMATION REGARDING
THE SECURITIES--DISTRIBUTION ON THE SECURITIES--DEPOSITS TO THE DISTRIBUTION
ACCOUNTS; PRIORITY OF PAYMENTS."
DISTRIBUTIONS OF PRINCIPAL
No principal will be paid on the Certificates until the Distribution Date on
which the principal balance of the Class A-1 and Class A-2 Notes has been
reduced to zero. On such Distribution Date and thereafter, the
Certificateholders will be entitled to distributions in an amount equal to
Available Principal calculated as described under "CERTAIN INFORMATION REGARDING
THE SECURITIES--DISTRIBUTIONS ON THE SECURITIES-- DEPOSITS TO THE DISTRIBUTION
ACCOUNTS; PRIORITY OF PAYMENTS" but not in excess of the outstanding principal
balance on the Certificates. Distributions with respect to principal payments
will be made from Available Principal after all Trust Fees and Expenses have
been paid and after the Note Distributable Amount and the Certificate Interest
Distributable Amount has been distributed. See "CERTAIN INFORMATION REGARDING
THE SECURITIES--DISTRIBUTIONS ON THE SECURITIES--DEPOSITS TO THE DISTRIBUTION
ACCOUNTS; PRIORITY OF PAYMENTS."
OPTIONAL PREPAYMENT
The Certificates will be subject to prepayment in whole, but not in part, on
any Distribution Date relating to an Optional Purchase. Certificateholders will
receive an amount in respect of the Certificates equal to the Certificate
Balance, together with accrued interest at the Pass-Through Rate. Any such
distribution will effect early retirement of the Certificates. See "CERTAIN
INFORMATION REGARDING THE SECURITIES--TERMINATION."
MANDATORY PREPAYMENT
As more fully described under "THE NOTES--EVENTS OF DEFAULT," upon the
occurrence of an Event of Default, under certain circumstances the Noteholders
have the right to cause the property of the Trust to be sold or liquidated in
whole or in part. In the event of such liquidation or sale, the Certificates may
suffer a loss if proceeds are insufficient to pay both the Notes and the
principal and interest on the Certificates.
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<PAGE>
PAYING AGENTS
Distributions of principal of and interest on the Certificates will be made
by the Owner Trustee or any Paying Agent or Paying Agents as the Owner Trustee
may designate from time to time. The Indenture Trustee will be designated as the
initial Paying Agent with respect to the Certificates.
CERTAIN INFORMATION REGARDING THE SECURITIES
FORM, EXCHANGE, REGISTRATION AND TITLE
The Notes and Certificates will initially be registered in the name of Cede
& Co. ("CEDE"), the nominee of The Depository Trust Company ("DTC").
Securityholders may hold their Securities in the United States through DTC, or,
solely in the case of the Notes, in Europe, through CEDEL Bank, societe anonyme
("CEDEL") or the Euroclear System ("EUROCLEAR"), if they are participants of
such systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Notes and Certificates. CEDEL
and Euroclear will hold omnibus positions on behalf of the CEDEL Participants
(as defined below) and Euroclear Participants (as defined below), respectively,
through customers' securities accounts in CEDEL's and Euroclear's names on the
books of their respective depositaries (collectively, the "DEPOSITARIES") which
in turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "CLEARING CORPORATION"
within the meaning of the New York Uniform Commercial Code, and a "CLEARING
AGENCY" registered pursuant to the provisions of Section 17A of the 1934 Act.
DTC accepts securities for deposit from its participating organizations
("PARTICIPANTS") and facilitates the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of Participants, thereby eliminating the need for
physical movement of securities. Participants include securities brokers and
dealers, banks and trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Transfers between Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European International clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities
35
<PAGE>
by or through a CEDEL Participant or a Euroclear Participant to a Participant
will be received with value on the DTC settlement date but will be available in
the relevant CEDEL or Euroclear cash account only as of the business day
following settlement in DTC.
Securityholders who are not Participants but desire to purchase, sell or
otherwise transfer, ownership of the Securities may do so only through
Participants (unless and until Definitive Securities are issued). In addition,
Securityholders will receive all distributions of principal of and interest on
the Securities from the Indenture Trustee or Owner Trustee (collectively, the
"TRUSTEES"), as applicable, through DTC and Participants. Securityholders will
not receive or be entitled to receive physical securities representing their
respective interests in the Securities, except under the limited circumstances
described below.
Unless and until Definitive Securities are issued, it is anticipated that
the only Securityholders will be Cede, as nominee of DTC. Beneficial owners of
the Securities will not be Securityholders as that term is used in the
Agreement. Beneficial owners are only permitted to exercise the rights of
Securityholders indirectly through Participants and DTC.
While the Securities are outstanding (except under the circumstances
described below), under the rules, regulations and procedures creating and
affecting DTC and its operations (the "RULES"), DTC is required to make
book-entry transfers among Participants on whose behalf it acts with respect to
the Securities and is required to receive and transmit distributions of
principal of, and interest on, the Securities. Unless and until Definitive
Securities are issued, beneficial owners who are not Participants may transfer
ownership of Securities only through Participants by instructing such
Participants to transfer the Securities only through Participants by instructing
such Participants to transfer the Securities by book-entry transfer through DTC
for the account of the purchasers of such Securities, which account is
maintained with their respective Participants. Under the Rules and in accordance
with DTC's normal procedures, transfers of ownership of the Securities will be
executed through DTC and the accounts of the respective Participants at DTC will
be debited and credited.
Physical Notes or Certificates will be issued in registered form to
Securityholders, or their nominees, rather than to DTC (such Securities being
referred to herein as "DEFINITIVE SECURITIES"), only if (i) DTC or the Company
advises the applicable Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to such Securities and the Company or such Trustee is unable to locate a
qualified successor; (ii) the Company, at its sole option and with the consent
of such Trustee, elects to terminate the book-entry system through DTC or (iii)
in the case of the Notes, after the occurrence of any Indenture Event of
Default, DTC, at the direction of Noteholders having a majority in interest of
the Notes, advises the Indenture Trustee in writing that the continuation of a
book-entry system through DTC (or a successor thereto) to the exclusion of any
physical securities being issued to Noteholders is no longer in the best
interest of Noteholders. Upon issuance of Definitive Securities to
Securityholders, such Securities will be transferable directly (and not
exclusively on a book-entry basis), and registered holders will deal directly
with the applicable Trustee with respect to transfers, notices and
distributions.
DTC has advised the Trust Depositor and the Trustee that, unless and until
Definitive Securities are issued, DTC will take any action permitted to be taken
by a Noteholder under the Indenture or a Certificateholder under the Trust
Agreement only at the direction of one or more Participants to whose DTC account
the Securities are credited. DTC has advised the Seller that DTC will take such
action with respect to any Percentage Interests of the Securities only at the
direction of and on behalf of such Participants with respect to such Percentage
Interests of the Securities. DTC may take actions, at the direction of the
related Participants, with respect to some Securities that conflict with actions
taken with respect to other Securities.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
PARTICIPANTS") and facilitates the clearance and
36
<PAGE>
settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants. Transactions
may be settled in CEDEL in any of 28 currencies, including United States
dollars. CEDEL provides to its CEDEL Participants, among other things services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. CEDEL interfaces with
domestic markets in several countries. As a professional depository, CEDEL is
subject to regulations by the Luxembourg Monetary Institute. CEDEL Participants
are recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporation and
certain other organizations and may include the underwriters of any class of
Securities. Indirect access to CEDEL is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968, to hold securities for participants of the
Euroclear System ("EUROCLEAR PARTICIPANTS") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
securities and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office (the "EUROCLEAR OPERATOR" or
"EUROCLEAR"), under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation (the "EUROCLEAR COOPERATIVE"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Euroclear Cooperative. The Euroclear Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries, indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "TERMS AND CONDITIONS"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific securities
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See "CERTAIN
FEDERAL AND STATE INCOME TAX CONSEQUENCES." CEDEL or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a
Noteholder under the Indenture on behalf of a CEDEL Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
37
<PAGE>
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of the Securities among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, CEDEL or Euroclear should discontinue its
services, the Seller would seek an alternative depositary (if available) or
cause the issuance of Definitive Securities to Securityholders or their nominees
in the manner described above.
Issuance of the Securities in book-entry form rather than as physical
securities may adversely affect the liquidity of the Securities in the secondary
market and the ability of Securityholders to pledge them. In addition, since
distributions on the Securities will be made by the Trustees to DTC and DTC will
credit such distributions to the accounts of its Participants, which will
further credit them to the accounts of indirect participants of Securityholders,
Securityholders may experience delays in the receipt of such distributions.
CONVEYANCE OF CONTRACTS
On the Closing Date, (i) the Seller will sell, transfer, assign, set over
and otherwise convey the Initial Contracts and related assets to the Trust
Depositor, (ii) the Trust Depositor will sell, transfer, assign, set over and
otherwise convey to the Trust all right, title and interest in the Initial
Contracts and related assets , and (iii) the Trust will pledge to the Indenture
Trustee all right, title and interest in the Initial Contracts and related
assets. The Initial Contracts will be described on a list delivered to each
Trustee and certified by a duly authorized officer of the Trust Depositor. Such
list will include the amount of monthly payments due on each Initial Contract as
of the Initial Cutoff Date, the contractual rate of interest on each Contract
and the maturity date of each Contract. Such list will be available for
inspection by any Securityholder at the principal office of the Servicer. Prior
to the conveyance of the Initial Contracts to the Trust, the Servicer's
compliance officer will have completed a review of all the related Contract
Files, including the certificates of title to, or other evidence of a perfected
security interest in, the Motorcycles, confirming the accuracy of the list of
Initial Contracts delivered to the Trustees. The Trust Depositor will deliver to
the Trustees a report of a nationally recognized independent public accounting
firm which states that such firm has performed specific procedures for a sample
of the Initial Contracts supplied by the Seller. Any Contract discovered not to
agree with such list in a manner that is materially adverse to the interests of
the Securityholders will be required to be repurchased by the Seller, or, if the
discrepancy relates to the unpaid Principal Balance of a Contract, the Seller
may deposit cash in the Collection Account in an amount sufficient to offset
such discrepancy.
In addition to the Initial Contracts, the Trust Property will include the
Trust's rights under the Agreement in respect of the Trust Depositor's
obligation to purchase from the Seller, and concurrently convey to the Trust,
Subsequent Contracts purchased as of the applicable Subsequent Cutoff Date (the
Initial Cutoff Date or any Subsequent Cutoff Date being individually referred to
herein as a "CUTOFF DATE"). Any conveyance of Subsequent Contracts on a
Subsequent Transfer Date will be subject to the satisfaction of the following
conditions, among others (computed, where applicable, based on the
characteristics of the Initial Contracts on the Initial Cutoff Date and any
Subsequent Contracts as of the related Subsequent Cutoff Date): (i) each such
Subsequent Contract satisfies the eligibility criteria specified in the Transfer
and Sale Agreement and the related Subsequent Purchase Agreement executed
thereunder; (ii) as of the applicable Subsequent Cutoff Date, no Contract in the
Trust, including the Subsequent Contracts that the Trust Depositor will be
conveying as of such Subsequent Cutoff Date, will have a scheduled maturity date
later than [ ]; (iii) the Trust Depositor shall have executed and
delivered in favor of the Trust a Subsequent Transfer Agreement conveying such
Subsequent Contracts to the Trust (including a schedule identifying such
Subsequent Contracts); (iv) the Trust Depositor shall have delivered certain
opinions of counsel to the Trustee, the Initial Purchaser and the Rating
Agencies with respect to the validity and other aspects of the conveyance of all
such Subsequent Contracts and
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(v) the Rating Agencies shall have each notified the Trust Depositor and the
Trustees in writing that, following the addition of such Subsequent Contracts,
the Class A-1 Notes and Class A-2 Notes will be rated AAA by S&P and Aaa by
Moody's and the Certificates will be rated at least [ ] by S&P and [ ]
by Moody's.
The Agreement will designate the Servicer as custodian to maintain
possession, as the Trustees' agent, of the Contracts and any other documents
relating to the Motorcycles. To facilitate servicing and save administrative
costs, the documents will not be segregated from other similar documents that
are in the Servicer's possession. Uniform Commercial Code financing statements
will be filed in Nevada and Illinois, reflecting the conveyance and assignment
of the Contracts to the Trust Depositor from the Seller, the conveyance and
assignment from the Trust Depositor to the Trust and the pledge from the Trust
to the Indenture Trustee, and the Seller's, Trust Depositor's and Indenture
Trustee's accounting records and computer systems will also reflect such
conveyance and assignment and pledge. In addition, each Contract will be stamped
to reflect their conveyance and assignment to the Trust and the pledge to the
Indenture Trustee. However, if, through fraud, negligence or otherwise, a
subsequent purchaser were able to take physical possession of the Contracts
without notice of such conveyance and assignment, the Indenture Trustee's
interest in the Contracts could be defeated. In addition, certificates of title
with respect to the Motorcycles will not be amended to reflect the assignment of
the Seller's security interest in the Motorcycles to the Trust Depositor, the
assignment of the Trust Depositor's security interest in the Motorcycles to the
Trust and the pledge of the Trust's security interest to the Indenture Trustee.
In the absence of amendments to the certificates of title, the Indenture Trustee
may not have a perfected security interest in the Motorcycles. See "RISK
FACTORS--RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES" in the
Prospectus.
The Seller will make certain representations and warranties in the Transfer
and Sale Agreement with respect to each Contract, including that (references to
the Closing Date below being deemed, in respect of Subsequent Contracts, to
refer to the related Subsequent Transfer Date): (a) as of the related Cutoff
Date the most recent scheduled payment was made or was not delinquent more than
30 days and, to the best of the Seller's knowledge, all payments on the Contract
were made by the Obligor of the Contract; (b) as of the Closing Date no
provision of a Contract has been waived, altered or modified in any respect,
except by instruments or documents contained in the Contract File; (c) each
Contract is a genuine, legal, valid and binding obligation of the Obligor and is
enforceable in accordance with its terms (except as may be limited by laws
affecting creditors' rights generally); (d) as of the Closing Date no Contract
is subject to any right of rescission, set-off, counterclaim or defense; (e) as
of the Closing Date each Motorcycle securing a Contract is covered by certain
insurance policies described under "DESCRIPTION OF THE CERTIFICATES--INDIVIDUAL
MOTORCYCLE INSURANCE"; (f) each Contract was originated by a Harley-Davidson
motorcycle dealer in the ordinary course of such dealer's business which dealer
had all necessary licenses and permits to originate the Contracts in the state
where such dealer was located, was fully and properly executed by the parties
thereto and was sold by such dealer to the Seller without any fraud or
misrepresentation on the part of such dealer; (g) no Contract was originated in
or is subject to the laws of any jurisdiction whose laws would make the
transfer, sale and assignment of the Contract pursuant to the Transfer and Sale
Agreement or the Agreement or pursuant to transfers of Certificates unlawful,
void or voidable; (h) each Contract and each sale of the related Motorcycle
complies with all requirements of any applicable federal, state or local law and
regulations thereunder, including, without limitation, usury, truth in lending,
motor vehicle installment loan and equal credit opportunity laws, with such
compliance not being affected by the Trust Depositor's conveyance and assignment
of the Contracts to the Trust, or the Trust's pledge of the Contracts to the
Indenture Trustee, and the Seller will maintain in its possession, available for
inspection by or delivery to the Trust Depositor and the Trustees, evidence of
compliance with all such requirements; (i) as of the Closing Date no Contract
has been satisfied, subordinated in whole or in part or rescinded and the
Motorcycle securing the Contract has not been released from the lien of the
Contract in whole or in part; (j) each Contract creates a valid, subsisting and
enforceable first priority security interest in favor of the Seller in the
Motorcycle covered thereby; such security interest
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has been conveyed and assigned by the Seller to the Trust Depositor and by the
Trust Depositor to the Trust and pledged by the Trust to the Indenture Trustee;
the original certificate of title, certificate of lien or other notification
(the "LIEN CERTIFICATE") issued by the body responsible for the registration of,
and the issuance of certificates of title relating to, motor vehicles and liens
thereon (the "REGISTRAR OF TITLES") of the applicable state to a secured party
which indicates the lien of the secured party on the Motorcycle is recorded on
the original certificate of title; and the original certificate of title for
each Motorcycle shows, or if a new or replacement Lien Certificate is being
applied for with respect to such Motorcycle the Lien Certificate will be
received within 180 days of the Closing Date and will show, the Seller as
original secured party under each Contract and as the holder of a first priority
security interest in such Motorcycle (and with respect to each Contract for
which the Lien Certificate has not yet been returned from the Registrar of
Titles, the Seller has received written evidence from the related dealer that
such Lien Certificate showing the Seller as lienholder has been applied for) and
the Seller's security interest has been validly assigned by the Seller to the
Trust Depositor and by the Trust Depositor to the Trust and pledged by the Trust
to the Indenture Trustee in order that immediately after the sale, each Contract
will be secured by an enforceable and perfected first priority security interest
in the Motorcycle in favor of the Indenture Trustee as secured party, which
security interest is prior to all other liens upon and security interests in
such Motorcycle which now exist or may hereafter arise or be created (except, as
to priority, for any lien for taxes, labor, materials or any state law
enforcement agency affecting a Motorcycle which may arise after such sale); (k)
all parties to each Contract had capacity to execute such Contract; (l) no
Contract has been sold, conveyed and assigned or pledged to any other person
other than the Trust Depositor, as transferee of the Seller, the Trust as
transferee of the Trust Depositor or the Indenture Trustee as pledgee of the
Trust, and prior to the transfer of the Contract to the Trust Depositor, the
Seller has good and marketable title to each Contract free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest, and as of
the Closing Date the Indenture Trustee will have a first priority perfected
security interest therein; (m) as of the related Cutoff Date there was no
default, breach, violation or event permitting acceleration under any Contract
(except for payment delinquencies permitted by clause (a) above), no event which
with notice and the expiration of any grace or cure period would constitute a
default, breach, violation or event permitting acceleration under such Contract,
and the Seller has not waived any of the foregoing; (n) as of the Closing Date
there are, to the best of the Seller's knowledge, no liens or claims which have
been filed for work, labor or materials affecting a motorcycle securing a
Contract, which are or may be liens prior or equal to the lien of the Contract;
(o) each Contract has a fixed rate of interest and provides for monthly payments
of principal and interest which, if timely made, would fully amortize the loan
on a simple interest basis over its term; (p) each Contract contains customary
and enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral of the benefits
of the security; (q) the description of each Contract set forth in the list
delivered to the Trustees is true and correct and (r) there is only one original
of each Contract. The Seller will also make certain representations and
warranties with respect to the Contracts in the aggregate, including that (i)
the aggregate principal amount payable by the Obligors as of the Initial Cutoff
Date (plus the Pre-Funded Amount as of the Closing Date) equals the sum of the
initial principal amount of the Notes and the Initial Certificate Balance, and
each Initial Contract has a contractual rate of interest of at least [ ]%,
(ii) all motorcycles securing the Contracts are Harley-Davidson or Buell
motorcycles, (iii) approximately [ ]% of the aggregate Principal Balance of
the Initial Contracts is attributable to loans to purchase new Motorcycles and
approximately [ ]% of the aggregate Principal Balance of the Initial
Contracts is attributable to loans to purchase used Motorcycles, (iv) no Initial
Contract has a remaining maturity of more than [ ] months, (v) the first
payment under each Initial Contract is due on or before [ ] and (vi) no
adverse selection procedures were or will be employed in selecting the Contracts
from the Seller's portfolio.
Under the Transfer and Sale Agreement and Subsequent Purchase Agreement, the
Seller will agree that in the event of a breach of any such representations and
warranties made by the Seller that materially and adversely affects the
Trustees' interest in any Contract the Seller will repurchase such
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Contract within 90 days at the Repurchase Price unless such breach is cured.
Under the Agreement, the Trust Depositor will assign all of its right, title and
interest in such representations and warranties (including the Seller's
repurchase obligations) to the Trustee. Under the Indenture, the Trust will
pledge its right, title and interest in such representations and warranties to
the Indenture Trustee. The Trust Depositor will make no representations and
warranties with respect to the Contracts. The Seller is selling the Contracts
without recourse and, accordingly, will have no obligation with respect to the
Contracts other than pursuant to such representations, warranties and repurchase
obligations. The repurchase obligations of the Seller described above will
constitute the sole remedy against the Seller by the Trust and the
Securityholders for a breach of any such representations and warranties made by
the Seller.
Pursuant to the Agreement, the Servicer will service and administer the
Contracts conveyed and assigned to the Trust and pledged to the Indenture
Trustee as more fully set forth below.
THE ACCOUNTS AND ELIGIBLE INVESTMENTS
THE COLLECTION ACCOUNT. The Servicer will cause all collections made on or
in respect of the Contracts during a Due Period to be deposited in or credited
to an account (the "COLLECTION ACCOUNT") to be established by the Indenture
Trustee under the Agreement. The Servicer is required to deposit, without
deposit into any intervening account, into the Collection Account as promptly as
possible, but in any case not later than the second Business Day following the
receipt thereof, all amounts received on or in respect of the Contracts. The
Servicer is required to use its best efforts to cause an Obligor to make all
payments on the Contracts directly to one or more Lockbox Banks, acting as agent
for the Trust pursuant to a Lockbox Agreement. Funds in the Collection Account
will be invested in Eligible Investments as described below.
"ELIGIBLE INVESTMENTS" will be specified in the Agreement and will be
limited to investments which meet the criteria of each Rating Agency that rated
any Class of Notes or the Certificates at the request of the Trust Depositor
from time to time as being consistent with their then-current ratings of the
related Securities. All income or other gain from such investments will be
promptly deposited in, and any loss resulting from such investments shall be
charged to, the Collection Account.
THE PRE-FUNDING ACCOUNT. During the Funding Period until the earliest of (a)
the Distribution Date on which the amount on deposit in the Pre-Funding Account
is less than $[ ], (b) the date on which an Event of Termination occurs
with respect to the Servicer under the Agreement, (c) the date on which certain
events of insolvency occur with respect to the Trust Depositor or (d) the close
of business on the date which is 90 days from and including the Closing Date,
the Pre-Funding Account will be maintained as an account in the name of the
Indenture Trustee on behalf of the Securityholders to secure the Trust
Depositor's obligations under the Agreement to purchase and transfer Subsequent
Contracts to the Trust and the Trust's obligations under the Indenture to pledge
Subsequent Contracts to the Indenture Trustee. The Pre-Funded Amount will
initially equal $[ ] and, during the Funding Period, will be reduced by the
amount thereof that the Trust Depositor uses to purchase Subsequent Contracts
from the Seller and contemporaneously transfer to the Trust. The Trust Depositor
expects that the Pre-Funded Amount will be reduced to less than $[ ] by the
Distribution Date occurring in [ ]. Any Pre-Funded Amount remaining at the
end of the Funding Period will be payable to the Noteholders (see "DESCRIPTION
OF THE NOTES--MANDATORY SPECIAL REDEMPTION").
THE RESERVE FUND. The Securityholders will be afforded certain limited
protection, to the extent described herein, against losses in respect of the
Contracts by the establishment of an account in the name of the Indenture
Trustee for the benefit of the Securityholders (the "RESERVE FUND").
The Reserve Fund will be created with the Reserve Fund Initial Deposit by
the Trust Depositor of $[ ] on the Closing Date. The funds in the Reserve
Fund will thereafter be supplemented on each Distribution Date by the deposit of
certain Excess Amounts and Subsequent Reserve Fund Amounts, until the amount in
the Reserve Fund reaches the Specified Reserve Fund Balance. The Specified
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Reserve Fund Balance for any Distribution Date will be calculated as described
under "CERTAIN INFORMATION REGARDING THE SECURITIES--PAYMENT PRIORITIES OF THE
NOTES AND THE CERTIFICATES; THE RESERVE FUND." On each Distribution Date, funds
will be withdrawn from the Reserve Fund, up to the Available Amount, for
distribution to Securityholders to cover any shortfalls in interest and
principal required to be paid on the Securities.
In addition to the Reserve Fund Initial Deposit, the Trust Depositor will
deposit $[ ], representing the initial Certificate Reserve Amount, into the
Reserve Fund on the Closing Date. If funds in the Reserve Fund (other than the
Certificate Reserve Amount) are applied in accordance with the preceding
paragraph and are insufficient to distribute the interest or principal due on
the Certificates, funds available from the Certificate Reserve Amount will be
withdrawn from the Reserve Fund and applied solely to distribute interest or
principal on the Certificates. The Certificate Reserve Amount will not be
available to pay interest or principal on the Notes. The Available Amount will
equal the amount of all funds on deposit in the Reserve Fund less the
undistributed balance of the Certificate Reserve Amount, if any.
On each Distribution Date, after giving effect to all distributions made on
such Distribution Date, any amounts in the Reserve Fund that are in excess of
the Specified Reserve Fund Balance will be allocated and distributed to the
Trust Depositor. See "CERTAIN INFORMATION REGARDING THE SECURITIES--PAYMENT
PRIORITIES OF THE NOTES AND THE CERTIFICATES; THE RESERVE FUND."
INTEREST RESERVE ACCOUNT. The Trust Depositor will establish, and fund with
an initial deposit on the Closing Date, the Interest Reserve Account, for the
purpose of providing additional funds for payment to the Trust of Carrying
Charges to pay certain distributions on Distribution Dates occurring during (and
on the first Distribution Date following the end of) the Funding Period. In
addition to the initial deposit, all investment earnings with respect to the
Pre-Funded Account are to be deposited into the Interest Reserve Account and,
pursuant to the Agreement, the Trust Depositor is obligated to pay to the Trust,
on each Distribution Date described above, amounts in respect of Carrying
Charges from such account.
The Interest Reserve Account will be established to account for the fact
that a portion of the proceeds obtained from the sale of the Notes will be
initially deposited in the Pre-Funding Account (as the initial Pre-Funded
Amount) rather than invested in Contracts, and the monthly investment earnings
on such Pre-Funded Amount (until the Pre-Funded Amount is used to purchase
Subsequent Contracts) are expected to be less than the weighted average of the
Class A-1 Rate, the Class A-2 Rate and the Pass-Through Rate with respect to the
corresponding portion of the Class A-1 Principal Balance, Class A-2 Principal
Balance and the Certificate Balance, as well as the amount necessary to pay the
Trustees' Fees. The Interest Reserve Account is not designed to provide any
protection against losses on the Contracts in the Trust. After the Funding
Period, money in the Interest Reserve Account will be released to the Trust
Depositor.
THE DISTRIBUTION ACCOUNTS. The Indenture Trustee will establish and
maintain with itself an account, in the name of the Indenture Trustee on behalf
of the Noteholders, in which amounts released from the Collection Account for
distribution to Noteholders will be deposited and from which all distributions
to Noteholders will be made (the "NOTE DISTRIBUTION ACCOUNT"). The Owner Trustee
will establish the Certificate Distribution Account, in the name of the Owner
Trustee on behalf of the Certificateholders, in which amounts released from the
Collection Account for distribution to Certificateholders will be deposited and
from which all distributions to Certificateholders will be made (the
"CERTIFICATE DISTRIBUTION ACCOUNT' and, together with the Note Distribution
Account, the "DISTRIBUTION ACCOUNTS").
DISTRIBUTIONS ON THE SECURITIES
GENERAL. On the fourth Business Day of each month (each such date, a
"DETERMINATION DATE"), the Servicer will determine the following: (i) the amount
of Available Monies with respect to the Distribution
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Date occurring in such month; (ii) the Note Interest Distributable Amount; (iii)
the Note Principal Distributable Amount; (iv) the Certificate Interest
Distributable Amount; (v) the Certificate Principal Distributable Amount; (vi)
the Servicing Fee; and (vii) the Trustees' Fees.
DEPOSITS TO THE DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS. On each
Distribution Date, the Servicer will allocate amounts on deposit in the
Collection Account as described below and will instruct the Indenture Trustee to
make the following deposits and distributions in the following amounts and order
of priority:
(i) to the Mandatory Special Redemption Subaccount in the Note
Distribution Account to the Class A-1 Noteholders and Class A-2 Noteholders,
the amount of any Mandatory Special Redemption, pro rata, calculated on the
then current principal balance of the Class A-1 and Class A-2 Notes with the
amounts derived from draws on the Pre-Funding Account (which amounts are
available for payment of such Mandatory Special Redemptions and not for any
other purpose); PROVIDED, HOWEVER, in the event the Mandatory Special
Redemption Amount is less than $[ ] such amount shall be allocated
solely to the Class A-1 Noteholders;
(ii) to the Servicer from Available Monies, reimbursement to the
Servicer for Advances previously made;
(iii) to the Servicer from Available Monies, the Servicing Fee,
including any unpaid Servicing Fee with respect to one or more prior Due
Periods;
(iv) to the Indenture Trustee and the Owner Trustee from Available
Monies, any accrued and unpaid Indenture Trustee's Fees and Owner Trustee's
Fees, respectively, with respect to one or more period Due Periods;
(v) to the Note Distribution Account from Available Monies, the Note
Interest Distributable Amount to the holders of the Notes at their
respective Interest Rates;
(vi) to the Note Distribution Account from Available Monies, the Note
Principal Distributable Amount to the holders of the Class A-1 Notes until
the principal amount of the Class A-1 Notes has been reduced to zero, and
second to the holders of the Class A-2 Notes until the principal amount of
the Class A-2 Notes has been reduced to zero;
(vii) to the Certificate Distribution Account from Available Interest,
the Certificate Interest Distributable Amount to the holders of the
Certificates; provided, however, in the event Available Interest is
insufficient to make such payment, from such other monies as may be
available to the Trust;
(viii) to the Certificate Distribution Account from Available Principal,
the Certificate Principal Distributable Amount to the holders of the
Certificates; provided, however, in the event Available Principal is
insufficient to make such payment, from such monies as may be available to
the Trust; and
(ix) in the event that the distributions described in clauses (i)
through (viii) above have been funded exclusively from Available Monies, any
remaining Available Monies ("EXCESS AMOUNTS") will be deposited into the
Reserve Fund, until the amount on deposit therein equals the Specified
Reserve Fund Balance, with any excess being distributed to the Trust
Depositor.
If the Notes are accelerated following an Event of Default, amounts
collected following the sale or liquidation of the property of the Trust will be
distributed in the priority described above. See "THE NOTES--EVENTS OF DEFAULT."
For the purposes hereof, the following terms will have the following
meanings:
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"AGGREGATE PRINCIPAL BALANCE" will equal the sum of the Principal Balances
of each outstanding Contract and the Pre-Funded Amount. At the time of initial
issuance of the Securities, the initial aggregate principal amount of the
Securities will equal the Aggregate Principal Balance plus the initial Pre-
Funded Amount.
"AGGREGATE PRINCIPAL BALANCE DECLINE" means, with respect to any
Distribution Date, the amount by which the Aggregate Principal Balance as of the
Distribution Date immediately preceding such Distribution Date (or as of the
Cutoff Date in the case of the first Distribution Date) exceeds the Aggregate
Principal Balance as of such Distribution Date.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the total
(without duplication) of the following amounts received by the Servicer on or in
respect of the Contracts during the related Due Period: (i) all amounts received
in respect of interest on the Contracts (as well as Late Payment Penalty Fees
and Extension Fees), (ii) the interest component of all Net Liquidation
Proceeds, (iii) the interest component of the aggregate of the Repurchase Prices
for Contracts repurchased by the Seller pursuant to a breach of representation
or warranty, (iv) all Advances made by the Servicer, (v) the interest component
of all amounts paid by the Trust Depositor in connection with an Optional
Purchase, (vi) all amounts received in respect of Carrying Charges transferred
from the Interest Reserve Account and (vii) all amounts received in respect of
interest, dividends, gains, income and earnings on investment of funds in the
Trust Accounts (which does not include the Interest Reserve Account).
"AVAILABLE MONIES" means, Available Interest and Available Principal.
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all amounts
received in respect of principal on the Contracts, (ii) the principal component
of all Net Liquidation Proceeds, (iii) the principal component of the aggregate
of the Repurchase Prices for Contracts repurchased by the Seller pursuant to a
breach of a representation or warranty, and (iv) the principal component of all
amounts paid by the Trust Depositor in connection with an Optional Purchase of
the Contracts.
"CERTIFICATE DISTRIBUTABLE AMOUNT" will mean, with respect to any
Distribution Date, the sum of the Certificate Principal Distributable Amount and
the Certificate Interest Distributable Amount for such Distribution Date.
"CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Interest Distributable
Amount for such Distribution Date and the Certificate Interest Carryover
Shortfall for such Distribution Date.
"CERTIFICATE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of the sum of the Certificate Monthly Interest
Distributable Amount for the immediately preceding Distribution Date and any
outstanding Certificate Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest on the Certificates
that was actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus interest on such excess, to the extent
permitted by law, at the Pass-Through Rate for the related Interest Period
"CERTIFICATE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, 30 days of interest (or in the case of the first
Distribution Date, interest accrued from and including the Closing Date to but
excluding such Distribution Date) at the Pass-Through Rate on the outstanding
principal amount of the Certificates on the immediately preceding Distribution
Date, after giving effect to all payments of principal to the Certificateholders
on such preceding Distribution Date (or, in the case of the first Distribution
Date, on the original principal amount of the Certificates).
"CERTIFICATE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, the Certificate Percentage of the Principal Distributable
Amount for such Distribution Date.
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"CERTIFICATE PERCENTAGE" means (i) for each Distribution Date to but
excluding the Distribution Date on which the principal amount of the Class A-2
Notes is reduced to zero, 0%, (ii) on the Distribution Date on which the
principal amount of the Class A-2 Notes is reduced to zero, 0% until the
principal amount of the Class A-2 Notes has been reduced to zero and (iii) 100%
thereafter.
"CERTIFICATE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of the sum of the Certificate Monthly Principal
Distributable Amount and any outstanding Certificate Principal Carryover
Shortfall from the immediately preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such Distribution Date.
"CERTIFICATE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Principal Distributable
Amount and (ii) any outstanding Certificate Principal Carryover Shortfall as of
the close of the immediately preceding Distribution Date; PROVIDED, HOWEVER,
that the Certificate Principal Distributable Amount shall not exceed the
Certificate Balance. In addition, on the Certificate Final Distribution Date,
the principal required to be deposited into the Certificate Distribution Account
will include the amount necessary to reduce the Certificate Balance to zero.
"DUE PERIOD" means, a calendar month during the term of the Agreement, and
the Due Period related to a Determination Date or Distribution Date shall be the
calendar month immediately preceding such date; PROVIDED, HOWEVER, that with
respect to the Initial Determination Date or Initial Distribution Date, the Due
Period shall be the period from the Initial Cutoff Date to and including
[ ], 199[ ].
"INTEREST PERIOD" means, with respect to any Distribution Date, the period
from and including the fifteenth day of the month of the Distribution Date
immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but excluding the fifteenth day of the
month of such Distribution Date.
"NOTE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date,
the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
"NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any Distribution
Date and a Class of Notes, the excess, if any, of the sum of the Note Interest
Distributable Amount for such Class for the immediately preceding Distribution
Date plus any outstanding Note Interest Carryover Shortfall for such Class on
such preceding Distribution Date, over the amount in respect of interest that
was actually deposited in the Note Distribution Account with respect to such
Class on such preceding Distribution Date, plus, to the extent permitted by
applicable law, interest on the amount of interest due but not paid to the
Noteholders of such Class on such preceding Distribution Date at the related
Interest Rate for the related Interest Period.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" will mean, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Monthly Interest
Distributable Amount and the Note Interest Carryover Shortfall for such Class of
Notes for such Distribution Date.
"NOTE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, interest accrued from and including the fifteenth day of the
month of the preceding calendar month to, but excluding, the fifteenth day of
the calendar month in which such Distribution Date occurs (or in the case of the
first Distribution Date, interest accrued from and including the Closing Date to
but excluding such Distribution Date) at the related Interest Rate for each
Class of Notes on the outstanding principal amount of the Notes of such Class on
the immediately preceding Distribution Date, after giving effect to all payments
of principal to Noteholders of such Class on or prior to such Distribution Date
(or, in the case of the first Distribution Date, on the original principal
amount of such Class of Notes).
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"NOTE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the Note Percentage of the Principal Distributable Amount for
such Distribution Date.
"NOTE PERCENTAGE" means (i) for each Distribution Date to but excluding the
Distribution Date on which the principal amount of the Class A-2 Notes is
reduced to zero, 100%; (ii) on the Distribution Date on which the principal
amount of the Class A-2 Notes is reduced to zero, 100% until the principal
amount of the Class A-2 Notes has been reduced to zero and (iii) 0.0%
thereafter.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of the sum of the Note Monthly Principal
Distributable Amount and any outstanding Note Principal Carryover Shortfall from
the immediately preceding Distribution Date over the amount in respect of
principal that was actually deposited in the Note Distribution Account on such
Distribution Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Note Monthly Principal Distributable Amount
for such Distribution Date and any outstanding Note Principal Carryover
Shortfall for the immediately preceding Distribution Date; PROVIDED, HOWEVER,
that the Note Principal Distributable Amount for a Class of Notes shall not
exceed the outstanding principal amount of such Class of Notes. Notwithstanding
the foregoing, the Note Principal Distributable Amount (i) on the Class A-1
Final Distribution Date shall not be less than the amount that is necessary
(after giving effect to other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding principal amount of the Class A-1 Notes to zero, and (ii) on the
Class A-2 Final Distribution Date shall not be less than the amount that is
necessary (after giving effect to other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the Outstanding Principal Amount of the Class A-2 Notes to zero.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the Aggregate Principal Balance Decline for such Distribution date.
"PRINCIPAL BALANCE" means, (a) with respect to any Contract as of any date,
an amount equal to the unpaid principal balance of such Contract as of the
opening of business on the Initial Cutoff Date or related Subsequent Cutoff
Date, as applicable, reduced by the sum of (x) all payments received by the
Servicer as of such date allocable to principal and (y) any Cram Down Loss in
respect of such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is
repurchased by the Seller because of a breach of representation or warranty, or
if (y) the Trust Depositor gives notice of its intent to purchase the Contracts
in connection with an optional termination of the Trust, in each case the
Principal Balance of such Contract or Contracts shall be deemed as of the
related Determination Date to be zero for the Due Period in which such event
occurs and for each Due Period thereafter, (ii) from and after the third Due
Period succeeding the final Due Period in which the Obligor is required to make
the final scheduled payment on a Contract, the Principal Balance, if any, of
such Contract shall be deemed to be zero, and (iii) from and after the Due
Period in which a Contract becomes a Liquidated Contract, the Principal Balance
of such Contract shall be deemed to be zero; and (b) where the context requires,
the aggregate of the Principal Balances described in clause (a) for all such
Contracts.
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PAYMENT PRIORITIES OF THE NOTES AND THE CERTIFICATES; THE RESERVE FUND
GENERAL. The rights of the Securityholders to receive distributions with
respect to the Contracts will be subordinated to the rights of the Servicer (to
the extent that the Servicer has not been reimbursed for any outstanding
Advances and has not been paid all Servicing Fees) and the Trustees and certain
other entities (to the extent the Trustees and such other entities have not
received all Trust Fees and Expenses payable to them). In addition, the rights
of the Securityholders to receive distributions with respect to the Contracts
will be subject to the priorities set forth under "-- DISTRIBUTIONS ON THE
SECURITIES -- DEPOSITS TO THE DISTRIBUTION ACCOUNTS; PRIORITY OF PAYMENT." Such
priorities and subordination are intended to enhance the likelihood of timely
receipt by the Noteholders of the full amount of interest and principal required
to be paid to them, and to afford such Noteholders limited protection against
losses in respect of the Contracts.
In the event of delinquencies or losses on the Contracts, the foregoing
protection will be effected both by the preferential right of the Noteholders to
receive, to the extent described herein, current distributions with respect to
the Contracts and by the establishment of the Reserve Fund. The Reserve Fund
will be an account in the name of the Indenture Trustee on behalf of the
Securityholders. The Reserve Fund will be created with an initial deposit by the
Trust on behalf of the Trust Depositor on the Closing Date of an amount equal to
the Reserve Fund Initial Deposit. The Reserve Fund will thereafter be funded by
the deposit therein of all Excess Amounts and Subsequent Reserve Fund Amounts,
if any, in respect of each Distribution Date until the amount on deposit in the
Reserve Fund is equal to the Specified Reserve Fund Balance.
If the amount on deposit in the Reserve Fund on any Distribution Date (after
giving effect to all deposits thereto or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Fund Balance, the
Indenture Trustee will distribute any excess to the Trust Depositor. Upon any
such distributions to the Trust Depositor, the Securityholders will have no
further rights in, or claims to, such amounts.
CALCULATION OF SPECIFIED RESERVE FUND BALANCE. The Reserve Fund will be
created with an initial deposit by the Trust on behalf of the Trust Depositor of
the sum of (i) an amount equal to $[ ] and (ii) the Certificate Reserve
Amount of $[ ], in the Trust and will thereafter be funded on each
Distribution Date by the deposit therein of certain monies pursuant to the
Agreement, until the monies in the Reserve Fund reach an amount equal to the
Specified Reserve Fund Balance (as hereinafter defined). Thereafter, on each
Distribution Date on which amounts held in the Reserve Fund (after giving effect
to any required withdrawals therefrom on such date) exceed the Specified Reserve
Fund Balance such amounts shall be released to the Trust Depositor.
The "SPECIFIED RESERVE FUND BALANCE" with respect to any Distribution Date
will be an amount equal to the sum of (i) [ ]% of the Principal Balance of the
Contracts in the Trust as of the first day of the immediately preceding Due
Period and (ii) $[ ]; PROVIDED, HOWEVER, in the event a Reserve Fund
Trigger Event (as hereinafter defined) occurs with respect to a Distribution
Date and has not terminated for three consecutive Distribution Dates (inclusive
of the respective Distribution Date), the Specified Reserve Fund Balance shall
be equal to the sum of (i) [ ]% of the Principal Balance of the Contracts in the
Trust as of the first day of the immediately preceding Due Period and (ii)
$[ ]. Notwithstanding the foregoing, in no event shall the Specified
Reserve Fund Balance be less than $[ ]. As of any Distribution Date, the
amount of funds actually on deposit in the Reserve Fund may, in certain
circumstances, be less than the Specified Reserve Fund Balance.
A "RESERVE FUND TRIGGER EVENT" will have been deemed to occur with respect
to any Distribution Date if (i) the Average Delinquency Ratio (as hereinafter
defined) for such Distribution Date is equal to or greater than [ ]%; (ii) the
Average Loss Ratio for such Distribution Date is equal to or greater than [ ]%;
(iii) the Cumulative Loss Ratio (as hereinafter defined) for such Distribution
Date is equal to or greater than (a) [ ]% with respect to any Distribution Date
which occurs within the period from the Closing Date
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to, and inclusive of, the first anniversary of the Closing Date, (b) [ ]% with
respect to any Distribution Date which occurs within the period from the day
after the first anniversary of the Closing Date to, and inclusive of, the second
anniversary of the Closing Date, or (c) [ ]% for any Distribution Date following
the second anniversary of the Closing Date or (iv) the Average Default Ratio (as
hereinafter defined) for such Distribution Date is equal to or greater than [
]%.
The "Average Delinquency Ratio" for any Distribution Date is equal to the
arithmetic average of the Delinquency Ratios for the Distribution Date and the
two immediately preceding Distribution Dates and the "DELINQUENCY RATIO" for any
Distribution Date is equal to the fraction (expressed as a percentage) derived
by dividing (a) the Delinquency Amount during the immediately preceding Due
Period multiplied by twelve by (b) the Principal Balance of the Contracts as of
the beginning of the related Due Period. The "DELINQUENCY AMOUNT" as of any
Distribution Date means the Principal Balance of all Contracts that were
delinquent 60 days or more as of the end of the related Due Period (including
Contracts in respect of which the related Motorcycles have been repossessed and
are still inventory). The "AVERAGE LOSS RATIO" for any Distribution Date is
equal to the arithmetic average of the Loss Ratios for such Distribution Date
and the two immediately preceding Distribution Dates and the Loss Ratio for any
Distribution Date is equal to the fraction (expressed as a percentage) derived
by dividing (x) the Net Liquidation Losses for all Contracts that became
Liquidated Contracts during the immediately preceding Due Period multiplied by
twelve by (y) the outstanding Principal Balances of all Contracts as of the
beginning of the related Due Period. "NET LIQUIDATION LOSSES" means, with
respect to a Liquidated Contract, the amount, if any, by which (a) the
outstanding Principal Balance of such Liquidated Contract plus accrued and
unpaid interest thereon at the Contract Rate to the date on which such
Liquidated Contract became a Liquidated Contract exceeds (b) the Net Liquidation
Proceeds for such Liquidated Contract. "NET LIQUIDATION PROCEEDS" means, as to
any Liquidated Contract, the proceeds realized on the sale or other disposition
of the related Motorcycle, including proceeds realized on the repurchase of such
Motorcycle by the originating dealer for breach of warranties, and the proceeds
of any insurance relating to such Motorcycle, after payment of all expenses
incurred thereby, together, in all instances, with the expected or actual
proceeds of any recourse rights relating to such Contract as well as any post
disposition proceeds received by the Servicer. "LIQUIDATED CONTRACT" means any
defaulted Contract as to which the Servicer has determined that all amounts
which it expects to recover from or on account of such Contract have been
recovered; provided that any defaulted Contract in respect of which the related
Motorcycle has been realized upon and disposed of and the proceeds of such
disposition have been realized shall be deemed to be a Liquidated Contract; and
provided further, a Contract which has been repossessed and has not been sold by
the Servicer for a period in excess of 90 days from such date of repossession or
a Contract which has been delinquent more than 150 days shall be deemed to be a
Liquidated Contract with a zero balance. The "CUMULATIVE LOSS RATIO" for any
Distribution Date means the fraction (expressed as a percentage) computed by the
Servicer by dividing (a) the aggregate Net Liquidation Losses for all Contracts
since the Cutoff Date through the end of the related Due Period by (b) the sum
of (i) the Principal Balance of the Contracts as of the Cutoff Date plus (B) the
Principal Balance of any Subsequent Contracts as of the related Subsequent
Cutoff Date. The "AVERAGE DEFAULT RATIO" for any Distribution Date is equal to
the arithmetic average of the Default Ratio for such Distribution Date and the
two immediately preceding Distribution Dates and the Default Ratio for any
Distribution Date is equal to the fraction (expressed as a percentage) derived
by dividing (x) the Principal Balance for all Contracts that become Defaulted
Contracts during the immediately preceding Due Period multiplied by twelve by
(y) the outstanding Principal Balances of all Contracts as of the beginning of
the related Due Period. A "DEFAULTED CONTRACT" means a Contract with respect to
which there has occurred one or more of the following: (i) all or some portion
of any payment under the Contract is 120 days or more delinquent, (ii)
repossession (and expiration of any redemption period) of a Motorcycle securing
a Contract, or (iii) the Servicer has determined in good faith that an Obligor
is not likely to resume payment under a Contract. A Trigger Event will be deemed
to have terminated with respect to a Distribution Date if no
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Trigger Event shall exist with respect to three consecutive Distribution Dates
(inclusive of the respective Distribution Date).
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of the Securityholders. Funds on deposit in the Reserve Fund may
be invested in Eligible Investments. Investment income on monies on deposit in
the Reserve Fund will not be available for distribution to Securityholders after
the Specified Reserve Fund Balance has been met and release to the Trust
Depositor. Any loss on such investments will be charged to the Reserve Fund.
"AVAILABLE AMOUNT" means, with respect to any Distribution Date, the amount
of funds on deposit in the Reserve Fund on such Distribution Date less the
Certificate Interest Reserve Amount with respect to such Distribution Date, in
each case, before giving effect to any reduction thereto on such Distribution
Date.
"CERTIFICATE RESERVE AMOUNT" means $[ ], as such amount may be reduced
or restored from time to time pursuant to the Agreement.
If on any Distribution Date the Certificate Principal Balance equals zero
and amounts on deposit in the Reserve Fund have been depleted as a result of
losses in respect of the Contracts, the protection afforded to the Noteholders
by the subordination of the Certificates and by the Reserve Fund will be
exhausted and the Noteholders will bear directly the risks associated with
ownership of the Contracts.
None of the Securityholders, the Indenture Trustee, the Owner Trustee, the
Seller nor the Trust Depositor will be required to refund any amounts properly
distributed or paid to them, whether or not there are sufficient funds on any
subsequent Distribution Date to make full distributions to the Securityholders.
The Servicer may, from time to time after the date of this Prospectus
Supplement request each Rating Agency that rated any of the Securities to, at
the request of the Trust Depositor, approve a formula for determining the
Specified Reserve Fund Balance that is different from the formula described
above and would result in a decrease in the amount of the Specified Reserve Fund
Balance or the Certificate Reserve Amount or the manner by which the Reserve
Fund is funded. If each Rating Agency delivers a letter to the Indenture Trustee
and the Owner Trustee to the effect that the use of any such new formulation
will not in and of itself result in a qualification, reduction or withdrawal of
its then-current rating of any Class of Securities then the Specified Reserve
Fund Balance will be determined in accordance with such new formula. The
Agreement will accordingly be amended to reflect such new calculation without
the consent of any Securityholder.
WITHDRAWALS FROM THE RESERVE FUND
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of the Securityholders. On each Distribution Date, funds will be
withdrawn from the Reserve Fund to the extent that the amount on deposit in the
Note Distribution Account with respect to any Distribution Date is less than the
Note Distributable Amount and will be deposited in the Note Distribution
Account. In addition, after giving effect to such withdrawal, funds will be
withdrawn from the Reserve Fund to the extent that the amount on deposit in the
Certificate Distribution Account is less than the Certificate Distributable
Amount and will be deposited in the Certificate Distribution Account. See
"PAYMENTS FROM THE RESERVE FUND."
PAYMENTS FROM THE RESERVE FUND
On each Distribution Date on which the Note Distributable Amount exceeds the
amount then on deposit in the Note Distribution Account, the Noteholders will be
entitled to receive such deficiency (including amounts necessary to reduce the
outstanding principal balance of a given Class of Notes to zero on the related
Note Final Distribution Date), from amounts on deposit in the Reserve Fund.
Subject
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to the Noteholders' priority on each Distribution Date on which the Certificate
Distributable Amount exceeds the amount then on deposit in the Certificate
Distribution Account, the Certificateholders will be entitled to receive such
deficiency (including amounts necessary to reduce the balance of the
Certificates to zero on the Certificate Final Distribution Date), from amounts
on deposit in the Reserve Fund.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Indenture Trustee a statement to be delivered to each Noteholder and to
the Owner Trustee a statement to be delivered to each Certificateholder on such
Distribution Date (the "DISTRIBUTION DATE STATEMENT"), setting forth with
respect to the related Distribution Date or Due Period, as applicable, among
other things, the following information:
(i) the amount of the Certificateholder's distribution allocable to
principal, and the amount of the Noteholder's principal distribution;
(ii) the amount of the Certificateholder's distribution allocable to
interest and the amount of the Noteholder's interest distribution;
(iii) the amount of fees payable out of the Trust, separately
identifying the Servicing Fee, and the Trustees' Fees;
(iv) the amount of any Note Interest Carryover Shortfall, Note Principal
Carryover Shortfall, Certificate Interest Carryover Shortfall and
Certificate Principal Carryover Shortfall on such Distribution Date and the
change in such amounts from those with respect to the immediately preceding
Distribution Date;
(v) the Note Pool Factor for each Class of Notes and the Certificate
Pool Factor, in each case as of such Distribution Date;
(vi) the amount of the distributions described in (i) or (ii) above
payable pursuant to a claim on the Reserve Fund or from any other source not
constituting Available Monies and the amount remaining in the Reserve Fund
after giving effect to all deposits and withdrawals from the Reserve Fund on
such date;
(vii) the amount of any Mandatory Special Redemption to be made on
such Distribution Date;
(viii) for each Distribution Date during the Funding Period, the
remaining Pre-Funded Amount;
(ix) for each Distribution Date during the Funding Period to and
including the Distribution Date immediately following the end of the Funding
Period, the Principal Balance and number of Subsequent Contracts conveyed to
the Trust during the related Due Period;
(x) the remaining Principal Balance after giving effect to the
distribution of principal (and Mandatory Special Redemption, if any) to each
class of Notes and the Certificates to be made on such Distribution Date;
(xi) the number and aggregate principal balance of Contracts delinquent,
31-59 days, 60-89 days and 90 or more days, computed as of the end of the
related Due Period;
(xii) the number and aggregate Principal Balance of Contracts that became
Liquidated Contracts during the immediately preceding Due Period, the amount
of liquidation proceeds for such Due Period, the amount of liquidation
expenses being deducted from liquidation proceeds for such Due Period, the
Net Liquidation Proceeds and the Net Liquidation Losses for such Due Period;
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(xiii) the Loss Ratio, the Average Loss Ratio, the Cumulative Loss Ratio,
the Delinquency Ratio, the Average Delinquency Ratio, the Default Ratio and
the Average Default Ratio as of such Distribution Date;
(xiv) the number of Contracts and the aggregate Principal Balance of such
Contracts, as of the first day of the Due Period relating to such
Distribution Date (after giving effect to payments received during such Due
Period and to any transfers of Subsequent Contract to the Trust occurring on
or prior to such Distribution Date);
(xv) the aggregate Principal Balance and number of Contracts that were
repurchased by the Seller pursuant to the Agreement with respect to the
related Due Period, identifying such Contracts and the Repurchase Price for
such Contracts; and
(xvi) such other customary factual information as is available to the
Servicer as the Servicer deems necessary and can reasonably obtain from its
existing data base to enable Noteholders and Certificateholders to prepare
their tax returns.
Each amount set forth pursuant to subclauses (i), (ii), (iii) and (iv) above
will be expressed in the aggregate and as a dollar amount per $1,000 of original
principal amount of a Note or the Initial Certificate Balance of a Certificate,
as the case may be. In addition, within the prescribed period of time for tax
reporting purposes after the end of each calendar year during the term of the
Agreement, the Indenture Trustee and the Owner Trustee will mail to each person
who at any time during such calendar year shall have been a Noteholder or a
Certificateholder, as the case may be, a statement containing the sum of the
amounts described in clauses (i), (ii), (iii) and (iv) above for the purposes of
such holder's preparation of federal income tax returns. See "FEDERAL INCOME TAX
CONSEQUENCES."
VOTING INTERESTS
The "VOTING INTERESTS" of the (i) Notes of a Class or Classes will be
allocated among the Noteholders or related Note Owners, as the case may be, in
accordance with the unpaid principal amount of the Notes of such Class or
Classes represented thereby and (ii) Certificates will be allocated among the
Certificateholders or related Certificate Owners, as the case may be, in
accordance with the Certificate Balance represented thereby; except that in
certain circumstances any Securities held by the Trust Depositor or the Seller,
or any of their respective affiliates shall be excluded from such determination.
AMENDMENT
AMENDMENT OF THE AGREEMENT. The Agreement may be amended, without the
consent of the Securityholders, to cure any ambiguity, correct or supplement any
provision therein which may be inconsistent with any other provision therein, to
add any other provisions with respect to matters or questions arising under such
agreement which are not inconsistent with the provisions thereof, to add or
provide for any credit enhancement for any Class of Securities or to permit
certain changes with respect to the amount required to be maintained on deposit
in the Reserve Fund; provided, that any such action will not, in the opinion of
counsel satisfactory to the related Trustee, materially and adversely affect the
interests of any such Securityholder, and provided further, that in the case of
a change with respect to the amount required to be maintained on deposit in or
pursuant to the Reserve Fund, the Trustee receives a letter from each Rating
Agency that rated any of the Securities to the effect that its then-current
rating on each Class of Securities will not be qualified, reduced or withdrawn
due to such amendment and the Servicer shall provide the Rating Agencies notice
of such amendment.
The Agreement may also be amended from time to time with the consent or the
holders of Notes and Certificates evidencing not less than 66 2/3% of the
respective voting interests thereof, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of such agreement
or of modifying in any manner the rights of the related Securityholders of each
Class;
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provided, that no such amendment may (i) except as described above, increase or
reduce in any manner the amount of or accelerate or delay the timing of
collections of payments on or in respect of the Contracts, required
distributions on the Securities, or the Specified Reserve Fund Balance or the
manner in which the Reserve Fund is funded, or (ii) reduce the aforesaid
percentage of the voting interests of which the holders of any Class of
Securities are required to consent to any such amendment, without the consent of
the holders of all of the relevant Class of Securities.
AMENDMENT OF THE TRUST AGREEMENT. The Trust Agreement may be amended
without the consent of the Securityholders, to cure any ambiguity, correct or
supplement any provision therein which may be inconsistent with any other
provision therein, or to add any other provisions with respect to matters or
questions arising under such agreement which are not inconsistent with the
provisions thereof; provided, that any such action will not, in the opinion of
counsel satisfactory to the related Trustee materially and adversely affect the
interests of any such Noteholder or Certificateholder.
The Trust Agreement may also be amended from time to time with the consent
of the Securityholders evidencing not less than 66 2/3% of the respective voting
interests thereof, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such agreement or of
modifying in any manner the rights of the Securityholders; provided, that no
such amendment may increase or reduce in any manner the amount of or accelerate
or delay the timing of (i) collections of payments on or in respect of the
Contracts or required distributions on the Securities or any Interest Rate or
the Pass-Through Rate or (ii) reduce the aforesaid percentage of the voting
interests of which the holders of any Class of Securities are required to
consent to any such amendment, without the consent of the holders of all of the
relevant Class of Securities.
AMENDMENT OF THE INDENTURE. The Trust and the Indenture Trustee (on behalf
of such Trust) may, without consent of the Noteholders, enter into one or more
supplemental indentures for any of the following purposes: (i) to correct or
amplify the description of the property subject to the lien of the Indenture or
to subject additional property to the lien of the Indenture; (ii) to provide for
the assumption of the Notes and the Indenture obligations by a permitted
successor to the Trust; (iii) to add additional covenants for the benefit of the
related Noteholders, or to surrender any rights or powers conferred upon the
Trust; (iv) to convey, transfer, assign, mortgage or pledge any property to the
Indenture Trustee; (v) to cure any ambiguity or correct or supplement any
provision in the Indenture or in any supplemental indenture which may be
inconsistent with any other provision in the Indenture, any supplemental
indenture, the Agreement or certain other agreements; provided, that any action
specified in clause (v) shall not adversely affect the interests of any
Noteholder; (vi) to provide for the acceptance of the appointment of a successor
Indenture Trustee or to add to or change any of the provisions of the Indenture
as shall be necessary and permitted to facilitate the administration by more
than one Indenture Trustee; (vii) to modify, eliminate or add to the provisions
of the Indenture in order to comply with the Trust Indenture Act of 1939, as
amended; and (viii) to add any provisions to, change in any manner, or eliminate
any of the provisions of, the Indenture or modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in clause
(viii) shall not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Noteholder unless such Noteholder's
consent is otherwise obtained as described below.
Without the consent of the holder of each outstanding Note affected thereby,
no supplemental indenture may: (i) change the due date of any installment of
principal of or interest on any Note or reduce the principal amount thereof, the
Interest Rate thereon (or the method by which such interest or principal is
calculated) or the redemption price with respect thereto or change any place of
payment where or the coin or currency in which any such Note or any interest
thereon is payable; (ii) impair the right to institute suit for the enforcement
of the provisions of the Indenture regarding payment; (iii) reduce the
percentage of the voting interests of the Notes, the consent of the holders of
which is required for any such supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as
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provided for in the Indenture; (iv) modify or alter the provisions of the
Indenture regarding the voting of Notes held by the Trust, any other obligor on
such Notes, the Trust Depositor, or any of their respective affiliates; (v)
reduce the percentage of the voting interests of the Notes, the consent of the
holders of which is required to direct the Indenture Trustee to sell or
liquidate the property of the Trust if the proceeds of such sale or liquidation
would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes; (vi) decrease the percentage of the aggregate
of such Notes required to amend the provisions of the Indenture which specify
the applicable percentage of voting interests of the Notes necessary to amend
such Indenture or certain other related agreements; or (vii) permit the creation
of any lien ranking prior to or on a parity with the lien of the Indenture with
respect to any of the collateral for the Notes or, except as otherwise permitted
or contemplated in the Indenture, terminate the lien of such Indenture on any
such collateral or deprive the holder of any such Note of the security afforded
by the lien of such Indenture.
LIST OF SECURITYHOLDERS
Upon the written request of the Servicer, the Owner Trustee will provide to
the Servicer within 15 days after receipt of such request, a list of the names
and addresses of all Certificateholders. In addition, three or more holders of
Certificates or holders of Certificates evidencing not less than 25% of the
voting interests of the Certificates, upon compliance by such Certificateholders
with certain provisions of the Trust Agreement, may request that the Owner
Trustee afford such Certificateholders access during business hours to the
current list of Certificateholders of purposes of communicating with other
Certificateholders with respect to their rights under the Trust Agreement.
Three or more holders of Notes may, by written request to the Indenture
Trustee, obtain access to the list of all Noteholders maintained by such
Indenture Trustee for the purpose of communicating with the other Noteholders
with respect to their rights under the Indenture or under the Notes. The
Indenture Trustee may elect not to afford the requesting Noteholders access to
the list of Noteholders if it agrees to mail the desired communication or proxy,
on behalf of and at the expense of the requesting Noteholders, to all
Noteholders.
Neither the Trust Agreement nor the Indenture will provide for the holding
of any annual or other meetings of Securityholders.
TRUST; INSOLVENCY EVENT
The Trust Agreement will provide that, in the event that Trust Depositor
becomes bankrupt, insolvent, withdraws or is expelled from the Trust or is
terminated or dissolved, the Trust will terminate in 90 days and thereafter
effect redemption of the Notes (if any) and prepayment of the Certificates
following the winding-up of the affairs of the Trust.
The Trust Agreement will provide that the Owner Trustee, each
Certificateholder, the Indenture Trustee and each Noteholder shall agree that
they will not at any time institute, or join in any institution against, the
Trust or the Trust Depositor, any bankruptcy proceedings relating to the
Certificates, the Notes, the Trust Agreement, the Indenture or certain other
agreements.
TERMINATION
The obligations of the Servicer, the Trust Depositor, the Owner Trustee and
Indenture Trustee with respect to the related Securityholders pursuant to the
Trust Agreement, Sale and Servicing Agreement or Indenture will terminate upon
the earliest to occur of (i) the maturity or other liquidation of the last
Contract and the disposition of any amounts received upon liquidation of any
property remaining in the Trust, or (ii) the payment to Securityholders of all
amounts required to be paid to them pursuant to the Indenture and the Trust
Agreement; PROVIDED, HOWEVER, in no event shall the Trust continue beyond the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the
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late Ambassador of the United States to the Court of St. James, living on the
Closing Date. The Seller's representations, warranties and indemnities will
survive any termination of the Agreement. Upon termination, amounts in the
Collection Account, if any, will be paid to the Trust Depositor.
The Owner Trustee and Indenture Trustee will give written notice of
termination to each Securityholder of record. The final distribution to each
Securityholder will be made only upon surrender and cancellation of such
holder's Securities at the office or agency of the related Trustee specified in
the notice of termination. Any funds remaining in the Trust, after such Trustee
has taken certain measures to locate a Securityholder and such measures have
failed, will be distributed to a charity designated by the Servicer.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding Notes and the satisfaction and
discharge of the Indenture, the Owner Trustee will succeed to all the rights of
the Indenture Trustee, and the Certificateholders will succeed to all the rights
of the Noteholders, under the Agreement, except as otherwise provided therein.
THE TRUSTEES
A Trustee may resign at any time, in which event the Administrator, or its
successor, will be obligated to appoint a successor trustee. The Administrator
(as defined herein) may also remove the Owner Trustee or the Indenture Trustee,
in each case if such Trustee becomes insolvent or ceases to be eligible to
continue as trustee under the Trust Agreement or Indenture, as the case may be.
In such event, the Administrator will be obligated to appoint a successor Owner
Trustee or Indenture Trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
Each Trustee and any of its affiliates may hold Securities in their own
names or as pledgees. For the purpose of meeting the legal requirements of
certain jurisdictions, the Administrator and the Owner Trustee or Indenture
Trustee acting jointly (or in some instances, the Owner Trustee and Indenture
Trustee acting without the Administrator) will have the power to appoint
co-trustees or separate trustees of all or any part of the Trust. In the event
of such an appointment, all rights, powers, duties and obligations conferred or
imposed upon such Trustee by the Indenture, the Agreement or Trust Agreement
will be conferred or imposed upon such Trustee and such separate trustee or
co-trustee jointly, or, in any jurisdiction in which such Trustee will be
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who will exercise and perform such rights, powers, duties
and obligations solely at the direction of such Trustee.
The Trust Agreement will further provide that the Owner Trustee will be
entitled to indemnification by the Trust Depositor for, and will be held
harmless against, any loss, liability or expense incurred by such Trustee not
resulting from its own willful misconduct, bad faith or negligence (other than
by reason of a breach of any of its representations or warranties set forth in
such agreement). The Indenture will further provide that the Indenture Trustee
will be entitled to indemnification by the Trust or the Administrator for any
loss, liability or expense incurred by such Trustee not resulting from its own
willful misconduct, negligence or bad faith.
DUTIES OF THE TRUSTEES
The Trustees will not make any representations as to the validity or
sufficiency of the Trust Agreement or Indenture, the Securities issued pursuant
thereto (other than the execution and authentication thereof) or of any
Contracts or related documents. The Trustees will not be accountable for the use
or application by the Trust Depositor or the Servicer of any funds paid to the
Trust Depositor or the Servicer in respect of such Securities or the related
Contracts or the investment of any monies by the Servicer
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before such monies are deposited into the Collection Account. The Trustees will
not independently verify the existence or characteristics of the Contracts. If
no Event of Default or Termination Event has occurred and is continuing, the
Trustees will be required to perform only those duties specifically required of
it under the Indenture, Trust Agreement or Agreement, as the case may be.
Generally those duties will be limited to the receipt of the various
certificates and reports or other instruments required to be furnished to such
Trustee under such agreements, in which case it will only be required to examine
them to determine whether they conform to the requirements of such agreements.
The Trustees will not be charged with knowledge of a failure by the Servicer to
perform its duties under the relevant agreements which failure constitutes an
Event of Default or a Termination Event unless the Owner Trustee or Indenture
Trustee obtains actual knowledge of such failure as specified in such
agreements.
Neither the Indenture Trustee nor Owner Trustee will be under any obligation
to exercise any of the rights or powers vested in it by the Indenture, Trust
Agreement or Agreement, as the case may be, or to make any investigation of
matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any of
the Securityholders, unless such Securityholders have offered to such Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Securityholder will have any right
under any such agreement to institute any proceeding with respect to such
agreement, unless such holder previously has given to such Trustee written
notice of default and (i) the default arises from the Servicer's failure to
remit payments when due or (ii) the holders of Securities evidencing not less
than 25% of the voting interests of all of the related Securities, voting
together as a single class, have made written request upon such Trustee to
institute such proceeding in its own name as Trustee thereunder and have offered
to such Trustee reasonable indemnity and such Trustee for 60 days has neglected
or refused to institute any such proceedings.
TRUST DEPOSITOR LIABILITY
The Trust Agreement will require the Trust Depositor to agree to be liable
directly to an injured party for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Securityholder in the
capacity of an investor with respect to the Trust) arising out of or based on
the arrangement created by the Trust Agreement as though such arrangement
created a partnership under the Delaware Revised Uniform Limited Partnership Act
in which Trust Depositor was a general partner.
ADMINISTRATION AGREEMENT
Eaglemark, in its capacity as administrator (in such capacity, the
"ADMINISTRATOR"), will enter into an agreement (the "ADMINISTRATION AGREEMENT")
with the Trust, the Trust Depositor and the Indenture Trustee pursuant to which
the Administrator will agree, to the extent provided in the Administration
Agreement, to provide the notices and to perform other administrative
obligations required to be provided or performed by the Trust or the Owner
Trustee under the Indenture. The Administrator in the Administration Agreement
agrees to perform certain accounting functions of the Trust which the Owner
Trustee is required to perform pursuant to the Trust Agreement, including but
not limited to maintaining the books of the trust, filing tax returns for the
trust, and delivering tax related reports to each Securityholder (except the
Owner Trustee shall retain responsibility for distributing the Schedule K-1s).
As compensation for the performance of the Administrator's obligations under the
Administration Agreement and as reimbursement for its expenses related thereto,
the Administrator will be entitled to a monthly administration fee (the
"Administration Fee"), which fee will be paid by the Servicer.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will manage, administer, service and make collections on the
Contracts exercising the degree of skill and care consistent with the highest
degree of skill and care that the Servicer exercises
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with respect to similar contracts serviced by the Servicer and in any event with
no less degree of skill and care than would be exercised by a prudent servicer
of motorcycle conditional sales contracts.
The Servicer may, consistent with its customary servicing procedures, grant
to the Obligor on any Contract an extension of payments due under such Contract,
provided that (i) the extension period is limited to [ ] days, (ii) and the
Obligor has been in good standing for the previous twelve-month period, (iii)
such extension is consistent with the Servicer's customary servicing procedures
and with the Agreement, (iv) such extension does not extend the maturity date of
the Contract beyond the last maturity date of any of the Contracts as of the
Initial Cutoff Date (or as of the last Subsequent Cutoff Date, if any) and (v)
the aggregate Principal Balances of Contracts which have had extensions granted
does not exceed more than [ ]% of the aggregate of the principal amount of
the Notes and the Certificate Balance.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer will be entitled to receive a Monthly Servicing Fee for each
Due Period (to be paid on the related Distribution Date) equal to [ ] of
[ %] of the Principal Balance of the Contracts as of the beginning of such
Due Period. Along with the Monthly Servicing Fee, and included as part of the
"Servicing Fee" as defined in the Agreement, the Servicer will be entitled to
receive late payment penalty fees and extension fee paid by Obligors during the
related Due Period as additional compensation. Such Servicing Fee is payable
prior to the payment of principal and interest on the Securities. See "Certain
Information Regarding the Securities--Distributions on the Securities" above.
The Servicing Fee provides compensation for customary third-party servicing
activities to be performed by the Servicer for the Trust, for additional
administrative services performed by the Servicer on behalf of the Trust and for
expenses paid by the Servicer on behalf of the Trust.
Customary servicing activities include collecting and recording payments,
communicating with Obligors, investigating payment delinquencies, providing
billing and tax records to Obligors and maintaining internal records with
respect to each Contract. Administrative services performed by the Servicer on
behalf of the Trust include selecting and packaging the Contracts, calculating
distributions to Noteholders and Certificateholders and providing related data
processing and reporting services for Noteholders and Certificateholders and on
behalf of the Trustees. Expenses incurred in connection with servicing of the
Contracts and paid by the Servicer from its servicing fees include payment of
fees and expenses of accountants, payments of all fees and expenses incurred in
connection with the enforcement of Contracts, and payment of expenses incurred
in connection with distributions and reports to Securityholders.
INDIVIDUAL MOTORCYCLE INSURANCE
The terms of each Contract require that for the life of the Contract, each
Motorcycle is covered by a collision and comprehensive or equivalent insurance
policy which covers physical damage risks, provides limited insurance coverage
for damage to the Motorcycle and names the Seller as a loss payee. The amount of
insurance coverage is limited to the value of the Motorcycle. In the Transfer
and Sale Agreement, the Seller has warranted that all premium payments on such
insurance have been paid in full for one year from the date of the Contracts'
origination. Pursuant to Contract terms, the Servicer may "force place"
collision and comprehensive insurance with respect to the related Motorcycle in
those situations in which the Obligor has not maintained the required insurance.
Currently, the Servicer utilizes Recreational Products Insurance Division, a
division of Universal Underwriters Insurance Company, to "force place"
comprehensive and collision insurance in [ ] states in which Obligors reside.
As conveyee and assignee of the Contracts, the Trust will be entitled to the
benefits of such insurance. See "Certain Information Regarding the Securities --
Conveyance of Contracts." Following repossession of a Motorcycle by the
Servicer, the Servicer does not maintain such insurance. In the event the
Servicer
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repossesses a Motorcycle on behalf of the Trust, the Servicer will act as
self-insurer for any damage to such motorcycle until it is resold.
EVIDENCE AS TO COMPLIANCE
Pursuant to the Agreement, on or before March 31 of each year, beginning on
March 31, 199 , the Servicer will deliver to the Trustees and the Rating
Agencies a report of a nationally recognized accounting firm, with respect to
the twelve months ended the immediately preceding December 31, a statement (the
"Accountant's Report") addressed to the Board of Directors of the Servicer, and
to the Trustees to the effect that such firm has audited the consolidated
financial statements of Eaglemark Financial and issued its report thereon and
that such audit (1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as such firm considered necessary in the
circumstances; (2) included an examination of documents and records relating to
the servicing of substantially similar motorcycle conditional sales contracts
under substantially similar pooling and servicing agreements (such substantially
similar statement to have attached thereto a schedule setting forth the pooling
and servicing agreements covered thereby, including the Agreement); (3) included
an examination of the delinquency and loss statistics relating to the portfolio
of motorcycle conditional sales contracts of Eaglemark Financial and its
subsidiaries; and (4) except as described in the statement, disclosed no
exceptions or errors in the records relating to motorcycle loans serviced for
others that, in the firm's opinion, generally accepted auditing standards
requires such firm to report. The Accountant's Report will further state that
(1) a review in accordance with agreed upon procedures was made of one randomly
selected Monthly Report and (2) except as disclosed in the Accountant's Report,
no exceptions or errors in the Monthly Report so examined were found.
The Agreement provides that the Servicer shall furnish to the Trustees and
the Rating Agencies such underlying data as each may reasonably request.
EVENTS OF TERMINATION
An Event of Termination under the Agreement will occur if (a) either the
Servicer or the Seller fails to make any payment or deposit required under the
Securities, the Agreement or the Transfer and Sale Agreement and such failure
continues for four Business Days after the date on which such payment or deposit
was due; (b) either the Servicer or the Seller fails to observe or perform in
any material respect any covenant or agreement in the Notes, Certificates, the
Agreement or the Transfer and Sale Agreement which continues unremedied for
thirty days after the date on which such failure commences; (c) either the
Servicer or the Seller assigns its duties or rights under the Agreement or the
Transfer and Sale Agreement, except as specifically permitted under the
Agreement or the Transfer and Sale Agreement, or attempts to make such an
assignment; (d) a court having jurisdiction in the premises enters a decree or
order for relief in respect of the Servicer or Trust Depositor in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoints a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Servicer, or Trust
Depositor, or for any substantial liquidation of their respective affairs; (e)
the Servicer or Trust Depositor commences a voluntary case under any applicable
bankruptcy, insolvency or similar law, or consents to the entry of an order for
relief in an involuntary case under any such law, or consents to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of the Servicer or Trust Depositor
or for any substantial part of its property or shall have made any general
assignment for the benefit of creditors, or fails to, or admits in writing its
inability to, pay debts as they become due, or takes any corporate action in
furtherance of the foregoing; (f) the failure of the Servicer to deliver the
Monthly Report pursuant to the terms of the Agreement and such failure remains
uncured for five business days after the date on which such failure commences;
or (g) any representation, warranty or statement of the Servicer made in the
Agreement or any certificate, report or other
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writing delivered pursuant thereto shall prove to be incorrect in any material
respect as of the time when the same shall have been made and the incorrectness
of such representation, warranty or statement has a material adverse effect on
the Trust and, within 30 days after written notice thereof shall have been given
to the Servicer or the Trust Depositor by the Trustee, the circumstances or
condition in respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or otherwise cured. The Servicer will
be required under the Agreement to give the Trustees, the Rating Agencies, the
Noteholders and the Certificateholders notice of an Event of Termination
promptly upon the occurrence of such Event.
RIGHTS UPON AN EVENT OF TERMINATION
If an Event of Termination has occurred and is continuing, the Noteholders
evidencing not less than 51% of the Outstanding Amount of the Notes or, if all
the Notes have been paid in full and the Indenture has been discharged in
accordance with its terms, the holders of Certificates with aggregate fractional
interests evidencing 50% or more of the Trust, may terminate all of the
Servicer's management, administrative, servicing, custodian and collection
functions under the Agreement. Upon such termination, the Indenture Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under the Agreement and will be entitled to similar compensation arrangements,
provided, however, that the Indenture Trustee will not assume any obligation of
the Seller to repurchase Contracts for breach of representations and warranties,
and the Indenture Trustee will not be liable for any acts or omissions of the
Servicer occurring prior to a transfer of the Servicer's servicing and related
functions or for any breach by the Servicer of any of its representations and
warranties contained in the Agreement or any related document or agreement.
Notwithstanding such termination, the Servicer shall be entitled to payment of
certain amounts payable to it prior to such termination, for services rendered
prior to such termination. No such termination will affect in any manner the
Seller's obligation to repurchase certain Contracts for breaches of
representations and warranties under the Agreement. In the event that the
Indenture Trustee in so acting would be in violation of legal requirements with
a resulting material adverse effect upon it, it may resign such role and if a
successor has not been appointed within 60 days, it may petition a court of
competent jurisdiction for its removal.
Following an Event of Termination, the Indenture Trustee shall terminate the
Lockbox Agreement and direct all Obligors under the Contracts to make all
payments under the Contracts to the Indenture Trustee, or to a lockbox
established by the Indenture Trustee.
ADVANCES
The Servicer is obligated to advance each month an amount equal to accrued
and unpaid interest on the Contracts which was delinquent with respect to the
related Due Period, but only to the extent that the Servicer believes that the
amount of such Advance will be recoverable from collections on the Contracts.
(Sale and Servicing Agreement, Section 7.03). The Servicer will deposit any
Advances in the Collection Account no later than the Determination Date. The
Servicer will be entitled to recoup Advances on a Contract by means of a first
priority withdrawal from Available Monies on any Distribution Date.
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SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS; REPURCHASE OBLIGATIONS
GENERAL
As a result of the Seller's conveyance and assignment of the Contracts to
the Trust Depositor pursuant to the Transfer and Sale Agreement, the Trust
Depositor's conveyance and assignment of the Contracts to the Trust pursuant to
the Agreement, the Trust's pledge to the Indenture Trustee pursuant to the
Indenture, the Noteholders and the Certificateholders, through the Indenture
Trustee, will succeed collectively to all of the rights under such Contracts
(including the right to receive payment on the Contracts) on or after the
related Cutoff Date. Each Contract evidences both (a) the obligation of the
Obligor to repay the loan evidenced thereby and (b) the grant of a security
interest in the Motorcycle to secure repayment of such loan. Certain aspects of
both features of the Contracts are more fully described below.
The Contracts are "CHATTEL PAPER" as defined in the Uniform Commercial Code
(the "UCC") in effect in the states in which the Motorcycles were initially
registered. Pursuant to the UCC, the sale of chattel paper is treated in a
manner similar to perfection of a security interest in chattel paper. The Seller
and the Depositor will make an appropriate filing of UCC-1 financing statements
in Nevada and Illinois to give notice of the Indenture Trustee's security
interest in the Contracts, and the Contracts held by the Servicer as custodian
will be stamped to reflect their conveyance and assignment from the Seller to
the Trust Depositor and the Trust Depositor to the Trust and their pledge from
the Trust to the Indenture Trustee. However, if a subsequent purchaser were able
to take physical possession of any Contracts without notice of such conveyance
and assignment, the Trust's interest in those Contracts could be defeated. See
"DESCRIPTION OF THE CERTIFICATES--CONVEYANCE OF CONTRACTS" above.
SECURITY INTERESTS IN THE MOTORCYCLES
The Motorcycles securing the Contracts are located in 50 states and the
District of Columbia. Security interests in motorcycles may be perfected either
by notation of the secured party's lien on the certificate of title or by
delivery of the required documents and payment of a fee to the state motor
vehicle authority, depending on state law. The Seller's practice is to effect
such notation or delivery of the required documents and fees, and to obtain
possession of the certificate of title, as appropriate under the laws of the
state in which any Motorcycle securing a Motorcycle conditional sales contract
is registered. In the event either the Trust Depositor fails, due to clerical
error, to effect such notation or delivery, or files the security interest under
the wrong law, the Seller may not have a first priority security interest in the
Motorcycle securing a Contract. In such event, the only recourse of the Trust
would be against the Seller pursuant to its repurchase obligation. See "SECURITY
INTEREST AND OTHER ASPECTS OF THE CONTRACTS; REPURCHASE OBLIGATIONS--REPURCHASE
OBLIGATIONS" below. However, the Seller believes that it has obtained a
perfected first priority security interest by proper notation or delivery of the
required documents and fees with respect to all of the Motorcycles securing
Contracts.
The Seller will convey and assign its security interest in the Motorcycles
to the Trust Depositor pursuant to the Transfer and Sale Agreement, the Trust
Depositor will convey and assign its security interest in the Motorcycles to the
Trust pursuant to the Agreement and the Trust will pledge its security interest
in the Motorcycles to the Indenture Trustee pursuant to the Indenture. However,
because of the administrative burden and expense, neither the Seller, the Trust
Depositor, the Owner Trustee nor the Indenture Trustee will amend the
certificates of title to identify the Indenture Trustee as the new secured party
and, accordingly, the Seller will continue to be named as the secured party on
the certificates of title relating to the Motorcycles. See generally "RISK
FACTORS--RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES"in the
Prospectus. The Seller, as Servicer, will continue to hold any certificates of
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title relating to the Motorcycles in its possession as custodian and agent for
the Trust pursuant to the Agreement.
In the event that the owner of a Motorcycle moves to a state other than the
state in which such Motorcycle initially is registered, under the laws of most
states the perfected security interest in the Motorcycle would continue for four
months after such relocation and thereafter until the owner re-registers the
motorcycle in such state. A majority of states generally require surrender of a
certificate of title to re-register a motorcycle; accordingly, the Servicer must
surrender possession if it holds the certificate of title to such Motorcycle or,
in the case of Motorcycles registered in states which provide for notation of
lien, the Seller would receive notice of surrender if the security interest in
the Motorcycle is noted on the certificate of title. Accordingly, the Servicer
would have the opportunity to re-perfect its security interest in the Motorcycle
in the state of relocation. In states which do not require a certificate of
title for registration of a motor vehicle, re-registration could defeat
perfection. In the ordinary course of servicing its portfolio of Motorcycle
conditional sales contracts, the Servicer takes steps to effect such re-
perfection upon receipt of notice of re-registration or information from the
obligor or the obligor's insurance carrier as to relocation. Similarly, when an
obligor under a Motorcycle conditional sales contract sells a Motorcycle, the
Servicer must surrender possession of the certificate of title or will receive
notice as a result of its lien noted thereon and accordingly will have an
opportunity to require satisfaction of the related Motorcycle conditional sales
contract before release of the lien. Under the Agreement, the Servicer is
obligated to take such steps, at its expense, as are necessary to maintain
perfection of security interests in the Motorcycles.
Under the laws of most states, liens for repairs performed on a motorcycle
take priority even over a perfected security interest. The Seller will represent
in the Transfer and Sale Agreement that as of the sale date of the Contracts, it
has no knowledge of any such liens with respect to any Motorcycle securing
payment on any Contract. However, such liens could arise at any time during the
term of a Contract. No notice will be given to the Trust, to the Noteholders or
Certificateholders in the event such a lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN MOTORCYCLES
The Servicer on behalf of the Trust may take action to enforce the Trust's
security interest with respect to defaulted Contracts by repossession and resale
of the Motorcycles securing such defaulted Contracts. Under the laws applicable
in most states, a creditor can repossess a motorcycle securing a contract by
voluntary surrender, by "SELF-HELP" repossession that is "PEACEFUL" (i.e.,
without breach of the peace) or, in the absence of voluntary surrender and the
ability to repossess without breach of the peace, by judicial process. The UCC
and consumer protection laws in most states place restrictions on repossession
sales, including requiring prior notice to the debtor and commercial
reasonableness in effecting such a sale. In the event of such repossession and
resale of a Motorcycle, the Trust would be entitled to be paid out of the sale
proceeds before such proceeds could be applied to the payment of the claims of
unsecured creditors or the holders of subsequently perfected security interests
or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to obtain a
deficiency judgment from a debtor for any deficiency on repossession and resale
of the motor vehicle securing such debtor's loan. However, some states impose
prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
OTHER MATTERS
The so-called "HOLDER-IN-DUE-COURSE" rule of the Federal Trade Commission is
intended to defeat the ability of the transferor of a consumer credit contract
which is the seller of goods which gave rise to
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the transaction (and certain related lenders' assignees) to transfer such
contract free of notice of claims by the debtor thereunder. The effect of this
rule is to subject the assignee of such a contract to all claims and defenses
which the debtor could assert against the seller. Liability under this rule,
which would be applicable to the Trust, is limited to amounts paid under a
Contract; however, the Obligor also may be able to assert the rule to set off
remaining amounts due as a defense against a claim brought by the Trust against
such Obligor. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination of and lending pursuant to the
Contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with their
provisions may affect the enforceability of the related Contract. See generally
"RISK FACTORS--ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO
REALIZE ON ITS SECURITY INTEREST IN THE MOTORCYCLES; CONSUMER PROTECTION LAWS"
in the Prospectus.
REPURCHASE OBLIGATIONS
Under the Transfer and Sale Agreement, the Seller will make warranties
relating to validity, subsistence, perfection and priority of the security
interest in each Motorcycle securing a Contract. Accordingly, if any defect
exists in the perfection of the security interest in any Motorcycle and such
defect materially adversely affects a Contract, such defect would constitute a
breach of a representation and warranty under the Transfer and Sale Agreement
and would create an obligation of the Trust Depositor to repurchase such
Contract from the Trust unless the breach is cured. See "CERTAIN INFORMATION
REGARDING THE SECURITIES--CONVEYANCE OF CONTRACTS" above.
In addition, the Seller will also warrant under the Transfer and Sale
Agreement that each Contract complies with all requirements of law. Accordingly,
if any Obligor has a claim against the Trust for violation of any law and such
claim materially adversely affects the Trust's interest in a Contract, such
violation would constitute a breach of a representation and warranty under the
Transfer and Sale Agreement and would create an obligation to repurchase such
Contract unless the breach is cured. See "CERTAIN INFORMATION REGARDING THE
SECURITIES--CONVEYANCE OF CONTRACTS" above.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of certain United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes and the Certificates. For a full description of the material federal
income tax consequences of the ownership of Notes and Certificates in the Owner
Trust, see the Prospectus, "FEDERAL INCOME TAX CONSEQUENCES--OWNER TRUSTS." Any
material variations from the discussion in the Prospectus, "FEDERAL INCOME TAX
CONSEQUENCES--OWNER TRUSTS" will be specified below.
The discussion herein is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), Treasury Regulations promulgated
thereunder, current administrative rulings, judicial decisions and other
applicable authorities in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect. There are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving a trust and
instruments issued by that trust with terms similar to those of the Trust, and
the Notes and the Certificates. As a result, there can be no assurance that the
IRS will not challenge the conclusions set forth in the following summary, and
no ruling from the IRS has been or will be sought on any of the issues discussed
below. Furthermore, legislative, judicial or administrative changes may occur,
perhaps with retroactive effect, which could affect the accuracy of the
statements and conclusions set forth herein as well as the tax consequences to
holders of the Notes and the Certificates.
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This discussion and the more detailed discussion set forth in the
Prospectus, "FEDERAL INCOME TAX CONSEQUENCES--OWNER TRUSTS," do not purport to
deal with all aspects of federal income taxation that may be relevant to all
holders of Notes and Certificates in light of their personal investment or tax
circumstances nor to certain types of holders who may be subject to special
treatment under the federal income tax laws (including, without limitation,
financial institutions, broker-dealers, insurance companies, foreign persons,
tax-exempt organizations and persons who hold the Notes or Certificates as part
of a straddle, hedging or conversion transaction). This information is generally
directed to prospective purchasers who purchase Notes or Certificates at the
time of original issue, who are citizens or residents of the United States, and
who hold the Notes or Certificates as "CAPITAL ASSETS" within the meaning of
Section 1221 of the Code. Taxpayers and preparers of tax returns (including
those filed by any partnership or other issuer) should be aware that under
applicable Treasury Regulations a provider of advice on specific issues of law
is not considered an income tax return preparer unless the advice is (i) given
with respect to events that have occurred at the time the advice is rendered and
is not given with respect to the consequences of contemplated actions, and (ii)
is directly relevant to the determination of an entry on a tax return.
Accordingly, taxpayers should consult their own tax advisors and tax return
preparers regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein. PROSPECTIVE INVESTORS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL,
FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF NOTES AND CERTIFICATES.
TAX CHARACTERIZATION OF THE TRUST AND THE NOTES
Winston & Strawn, as federal tax counsel ("FEDERAL TAX COUNSEL") to the
Trust Depositor has delivered an opinion to the Trust Depositor that for U.S.
federal income tax purposes (i) the Trust will not be treated as an association
(or publicly traded partnership) taxable as a corporation and (ii) the Notes
will be treated as indebtedness of the Trust. This opinion is based on the
assumption that the terms of the Trust Agreement and related documents will be
complied with, including, without limitation, that the Trust Depositor, each
Certificateholder, and each Noteholder will agree to treat the Certificates as
equity interests in a partnership and the Notes as debt of such partnership and
that the Certificateholders will take all action necessary, if any, or refrain
from taking any inconsistent action so as to ensure that the Trust is a
partnership under Treasury Regulations sections 301.7701-2 and 301.7701-3. The
Owner Trustee on behalf of the Trust will file IRS Form 8832 making for the
Trust a protective election to be treated as a partnership for federal income
tax purposes. The opinion is also based on Federal Tax Counsel's conclusions
that (i) the Trust will constitute a business entity that has two or more
members within the meaning of those regulations; (ii) the nature of the Trust's
income will exempt it from the rule that certain publicly traded partnerships
are taxable as corporations, and (iii) the Trust, if a corporation, would not
constitute a regulated investment company under Code Section 851. An opinion of
counsel is not binding on a court or the IRS and there can be no assurance that
the IRS or a court will agree with Federal Tax Counsel's opinion.
GENERAL TAX TREATMENT OF HOLDER'S OF NOTES
Unless the Notes are treated as having original issue discount, a holder of
a Note will generally be taxable on the interest received or accrued with
respect to the Note under the holder's general system of tax accounting. On a
sale of a Note, a holder will generally recognize gain or loss on the difference
between the amount realized and the holder's basis in the Note. Such gain or
loss generally will be capital gain or loss. Withholding tax may be imposed on
payments received with respect to the Notes unless certain IRS forms are
provided to the Owner Trustee or the holder is eligible for an exemption from
such withholding. For a complete discussion of these withholding rules and the
other federal income tax consequences to a holder of the Notes, see the
Prospectus," FEDERAL INCOME TAX CONSEQUENCES-- OWNER TRUSTS."
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GENERAL TAX TREATMENT OF A HOLDER A CERTIFICATE
A holder of a Certificate, as a partner in a partnership, will be treated as
receiving such holder's allocable share of the Trust's income, gain, loss, or
deductions in accordance with the terms of the Trust Agreement, the Code, and
the Regulations promulgated thereunder. The holder will generally recognize gain
or loss on the sale of a Certificate equal to the difference between the amount
realized and the holder's basis in its partnership interest that is allocated to
the Certificate. Withholding taxes may also be imposed with respect to payments
on the Certificates unless certain IRS forms are provided to the Owner Trustee
or the holder is eligible for an exemption from such withholding. For a complete
discussion of these withholding tax rules and the other federal income tax
consequences to a holder of a Certificate, see the Prospectus, "FEDERAL INCOME
TAX CONSEQUENCES--OWNER TRUSTS."
ERISA CONSIDERATIONS
THE NOTES
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA ("ERISA
Plans") and prohibits certain transactions between ERISA Plans and persons who
are "PARTIES IN INTEREST" (as defined under ERISA) with respect to assets of
such Plans. Section 4975 of the Code prohibits a similar set of transactions
between certain plans or individual retirement accounts ("CODE PLANS," and
together with ERISA Plans, "PLANS") and persons who are "DISQUALIFIED PERSONS"
(as defined in the Code) with respect to Code Plans. Certain employee benefit
plans, such as governmental plans and church plans (if no election has been made
under Section 410(d) of the Code), are not subject to the requirements of ERISA
or Section 4975 of the Code, and assets of such plans may be invested in the
Notes, subject to the provisions of other applicable federal and state law. Any
such plan which is qualified under Section 401(a) of the Code and exempt from
taxation under Section 501(a) of the Code is, however, subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that investments be made in accordance with
the documents governing the ERISA Plan. Before investing in the Notes, an ERISA
Plan fiduciary should consider, among other factors, whether to do so is
appropriate in view of the overall investment policy and liquidity needs of the
ERISA Plan.
PROHIBITED TRANSACTIONS
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit
parties in interest and disqualified persons with respect to ERISA Plans and
Code Plans from engaging in certain transactions involving such Plans or "PLAN
ASSETS" of such Plans, unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code and Sections 502(i) and 502(1) of
ERISA provide for the imposition of certain excise taxes and civil penalties on
certain persons that engage or participate in such prohibited transactions. The
Trust Depositor, the Underwriter, the Servicer, the Indenture Trustee or the
Owner Trustee or certain affiliates thereof may be considered or may become
parties in interest or disqualified persons with respect to a Plan. If so, the
acquisition or holding of the Notes by, on behalf of or with "PLAN ASSETS" of
such Plan may be considered to give rise to a "prohibited transaction" within
the meaning of ERISA and/or Section 4975 of the Code, unless an administrative
exemption described below or some other exemption is available.
The Notes may not be purchased with the assets of a Plan if the Trust
Depositor, the Underwriter, the Servicer, the Indenture Trustee, or the Owner
Trustee or an affiliate thereof either (a) has discretionary authority or
control with respect to the investment or management of such assets or (b) has
authority or responsibility to give, or regularly gives, investment advice with
respect to such assets pursuant to an agreement or understanding that such
advice will serve as a primary basis for investment decisions with
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respect to such assets and that such advice will be based on the particular
needs of the Plan or (c) is an employer of employees covered under the Plan
unless such investment is made through an insurance company general or pooled
separate account or a bank collective investment fund and an exemption is
available.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the Notes--for
example, Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "IN-HOUSE ASSET
MANAGER;" PTCE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest; PTCE 91-38, which exempts
certain transactions between bank collective investment funds and parties in
interest; PTCE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest; or PTCE 84-14, which
exempts certain transactions effected on behalf of a Plan by a "QUALIFIED
PROFESSIONAL ASSET MANAGER." There can be no assurance that any of these
exemptions will apply with respect to any Plan's investment in the Notes or,
even if an exemption were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment.
Due to the complexity of these rules and the penalties imposed, any
fiduciary or other Plan investor who proposes to invest assets of a Plan in the
Notes should consult with its counsel with respect to the potential consequences
under ERISA and Section 4975 of the Code of doing so.
THE CERTIFICATES
THE CERTIFICATES MAY NOT BE ACQUIRED BY A PLAN.
By its acceptance of a Certificate or a beneficial interest therein, each
Certificateholder or Certificate Owner will be deemed to have represented and
warranted that it is not (i) an employee benefit plan (as defined in Section
3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Code (other than a governmental plan
described in Section 4975(g)(2) of the Code) or (iii) any entity whose
underlying assets include assets of such a plan by reason of the plan's
investment in the entity or which uses assets of such a plan to acquire
Certificates.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated [ ], 199[ ], among the Seller, Trust Depositor and the Underwriter (the
"UNDERWRITING AGREEMENT"), the Seller has agreed to cause the Trust to sell to
the Underwriter named below (the "UNDERWRITER"), and the Underwriter has agreed
to purchase, the principal amount of the Securities set forth below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CERTIFICATES
- ------------------------------------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C>
Salomon Brothers Inc............................ $ [ ] $ [ ] $ [ ]
</TABLE>
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the Securities if any
Securities are purchased. In the event of default by the Underwriter, the
Underwriting Agreement provides that, in certain circumstances, the Underwriting
Agreement may be terminated.
Distribution of the Securities may be made by the Underwriter from time to
time in one or more negotiated transactions, or otherwise, at varying prices to
be determined at the time of sale. The Underwriter may effect such transactions
by selling the Securities to or through dealers, and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriter. In connection with the sale of the Securities, the
Underwriter may be deemed to have received compensation from the Seller in the
form of underwriting compensation. The Underwriter and any dealers that
participate with the Underwriter may be deemed to be an underwriter, and any
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<PAGE>
commissions received by them and any profit on the resale of the Securities
positioned by them may be deemed to be underwriting discounts and commissions,
under the Securities Act.
If the Underwriter creates a short position in the Securities in connection
with the offering, i.e., if it sells more Securities than are set forth on the
cover page of this Prospectus Supplement, the Underwriter may reduce that short
position by purchasing Securities in the open market.
In general, purchases of a security to reduce a short position could cause
the price of the security to be higher than it might be in the absence of such
purchases.
Neither the Seller nor the Underwriter makes any representations or
prediction as to the direction or magnitude of any effect that the transactions
described above, if engaged in, may have on the prices of the Securities. In
addition, neither the Seller nor the Underwriter makes any representation that
the Underwriter will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Underwriter has represented and agreed that (i) it has not offered or
sold and, prior to the expiration of the period of six months from the Closing
Date, will not offer or sell any Notes to persons in the United Kingdom, except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulation 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Notes in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995, or is a person to whom such document may otherwise
lawfully be issued or passed on.
The Underwriting Agreement provides that the Seller and the Trust Depositor
will indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act, or contribute to payments the Underwriter
may be required to make in respect thereof.
RATINGS OF THE SECURITIES
It is a condition of issuance that the Class A-1 Notes be rated AAA by S&P
and Aaa by Moody's and the Class A-2 Notes be rated AAA by S&P and Aaa by
Moody's and the Certificates each be rated at least [ ] by S&P and [ ]
by Moody's.
There is no assurance that any such rating will continue for any period of
time or that it will not be revised or withdrawn entirely by the assigning
rating agency if, in its judgment, circumstances so warrant. A revision or
withdrawal of such rating may have an adverse effect on the market price of the
Notes and the Certificates. A security rating is not a recommendation to buy,
sell or hold the Securities.
LEGAL MATTERS
Certain legal matters with respect to the Securities, including certain
federal income tax matters, will be passed upon for the Seller, Servicer, Trust
Depositor and the Trust by Winston & Strawn, Chicago, Illinois. Certain legal
matters for the Underwriter will be passed upon by Brown & Wood LLP., New York,
New York.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "GLOBAL SECURITIES") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through DTC and, in the
case of the Notes, CEDEL or Euroclear. The Global Securities will be tradeable
as home market instruments in both the European and U.S. domestic markets.
Initial settlement and all secondary trades will settle in same-day funds.
Capitalized terms used but not defined in this Annex I have the meanings
assigned to them in the Prospectus Supplement and the Prospectus.
Secondary market trading between investors holding Global Securities through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (I.E. seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry from by DTC in the name of
Cede & Co. as nominee of DTC investors' interest in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to similar issues on pass-through
certificates. Investors' securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "LOCK-UP" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payments in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish the time of the trade where both the purchaser's and seller's accounts
are located to ensure that settlement can be made on the desired value date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to similar issues
of pass-through certificates in same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
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TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securitie /from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date; (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (I.E., the trade fails), the CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-positions funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, CEDEL or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the CEDEL Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account, would be back-valued to the value date (which would be
the preceding day, when settlement occurred in New York). Should the CEDEL
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation or receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day-period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds
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in the CEDEL Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use, CEDEL or
Euroclear and that purchase Global Securities from DTC Participants for delivery
to CEDEL Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Securities
sufficient time to be reflected in their CEDEL or Euroclear account in order to
settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the CEDEL Participant or Euroclear
Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENT
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issued discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of
Securities that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must
be filed within 30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WILL EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY
COUNTRIES (FORM 1001). Non-U.S. Persons that are Securityholders residing in
a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed
by the Securityholder or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURES. The holder of a Global
Security or in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books
of
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the clearing agency). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year.
The term "U.S. PERSON" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (ii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source or which is under the supervision of a U.S. court or
U.S. fiduciary. This summary does not deal with all aspects of U.S. Federal
income tax withholding that may be relevant to foreign holders of the Global
Securities. Investors are advised to consult their own tax advisors for specific
tax advice concerning their holding and disposing of the Global Securities.
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INDEX OF TERMS
<TABLE>
<S> <C> <C>
Class A-1 Noteholders........................................... 8
Class A-1 Notes............................................. 1
Class A-2 Notes............................................. 1
Harley-Davidson............................................. 2
Class A-2 Noteholders........................................... 8
Aggregate Principal Balance Decline........................... 45
Available Principal......................................... 45
Certificates................................................ 1
Aggregate Principal Balance................................. 44
Agreement................................................... 2
Available Amount............................................ 11, 49
Available Interest.......................................... 45
Available Monies............................................ 45
Average Default Ratio....................................... 49
Average Delinquency Ratio................................... 48
Buell....................................................... 2
Business Day................................................ 7
Carrying Charges............................................ 12
Certificate Balance......................................... 9
Certificate Distributable Amount............................ 45
Certificate Distribution Account............................ 43
Certificate Final Distribution Date......................... 7
Certificate Interest Carryover Shortfall.................... 45
Certificate Interest Distributable Amount................... 45
Certificate Monthly Interest Distributable Amount........... 45
Certificate Monthly Principal Distributable Amount.......... 45
Certificate Percentage...................................... 45
Certificate Principal Carryover Shortfall................... 46
Certificate Principal Distributable Amount.................. 46
Certificate Reserve Amount.................................. 11, 49
Class A-1 Final Distribution Date........................... 7
Class A-1 Rate.............................................. 2, 7
Class A-2 Rate.............................................. 2
Class A-2 Final Distribution Date........................... 7
Class A-2 Rate.............................................. 7
Collection Account.......................................... 42
Contracts................................................... 2
Cumulative Loss Ratio....................................... 49
Cutoff Date................................................. 40
Dealer Recourse............................................. 20
Defaulted Contract.......................................... 49
Delinquency Amount.......................................... 48
Delinquency Ratio........................................... 48
Determination Date.......................................... 43
Distribution Date........................................... 1
Due Period.................................................. 46
Eaglemark................................................... 2
Eligible Investments........................................ 42
</TABLE>
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<TABLE>
<S> <C> <C>
Events of Default........................................... 35
Excess Amounts.............................................. 11
Final Distribution Dates.................................... 7
Funding Period.............................................. 11
Indenture................................................... 2
Indenture Trustee........................................... 2
Initial Certificate Balance................................. 9
Initial Contracts........................................... 2
Initial Cutoff Date......................................... 2
Interest Period............................................. 8, 46
Interest Rates.............................................. 7
Interest Reserve Account.................................... 12
Lien Certificate............................................ 41
Liquidated Contract......................................... 49
Mandatory Special Redemption................................ 8
Monthly Servicing Fee....................................... 15
Moody's..................................................... 3
Motorcycles................................................. 7
Net Liquidation Losses...................................... 48
Net Liquidation Proceeds.................................... 48
Note Distributable Amount................................... 46
Note Distribution Account................................... 43
Note Final Distribution Dates............................... 7
Note Interest Carryover Shortfall........................... 46
Note Interest Distributable Amount.......................... 46
Note Monthly Interest Distributable Amount.................. 46
Note Monthly Principal Distributable Amount................. 46
Note Percentage............................................. 46
Note Principal Carryover Shortfall.......................... 47
Note Principal Distributable Amount......................... 47
Notes....................................................... 1
Optional Purchase........................................... 3
Owner Trustee............................................... 2
Pass-Through Rate........................................... 2
Paying Agent................................................ 9
Pre-Funding Account......................................... 2
Principal Balance........................................... 47
Principal Distributable Amount.............................. 47
Rating Agencies............................................. 3
Record Date................................................. 7
Registrar of Titles......................................... 41
Reserve Fund................................................ 10, 42
Reserve Fund Deposits....................................... 11
Reserve Fund Initial Deposit................................ 11
Reserve Fund Trigger Event.................................. 48
S&P......................................................... 3
Securities.................................................. 1
Servicer.................................................... 2
Specified Reserve Fund Balance.............................. 43
Subsequent Contracts........................................ 2
Subsequent Cutoff Date...................................... 10
</TABLE>
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<TABLE>
<S> <C> <C>
Subsequent Reserve Fund Amount.............................. 11
Subsequent Transfer Agreement............................... 16
Subsequent Transfer Date.................................... 10
Terms....................................................... 1, 43
Transfer and Sale Agreement................................. 2
Trust....................................................... 2
Trust Agreement............................................. 2
Trust Depositor............................................. 2
Trust Insolvency............................................ 35
Trust Property.............................................. 2
Trustees.................................................... 2
</TABLE>
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Expenses in connection with the offering of the Securities being
registered herein are estimated as follows:
SEC registration fee.......................................... $181,818
Legal fees and expenses....................................... $200,000
Accounting fees and expenses.................................. $ 25,000
Blue sky fees and expenses.................................... $ 8,000
Rating agency fees............................................ $ 30,000
Trustee's fees and expenses................................... $ 12,500
Printing...................................................... $ 45,000
Miscellaneous................................................. $ 30,000
Total......................................................... $532,318
- ------------------------
* All amounts except the SEC Registration Fee are estimates of expenses
incurred or to be incurred in connection with the issuance and distribution
of a Series of Securities in an aggregate principal amount assumed for
these purposes to be equal to $600,000,000 of Securities registered hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Eaglemark, Inc. has undertaken in its certificate of incorporation and
bylaws to indemnify, to the maximum extent permitted by the Nevada General
Corporation Law as from time to time amended, any currently acting or former
director, officer, employee and agent of Eaglemark, Inc. against any and all
liabilities incurred in connection with their services in such capacities.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
1.1* Form of Underwriting Agreement
3.1* Restated Certificate of Incorporation of the
Company
3.2* Bylaws of the Company
4.1* Form of Trust Agreement (including form
of Certificates)
4.2* Form of Pooling and Servicing Agreement
(including form of Certificates)
4.3** Form of Indenture (including form of
Notes)
5.1* Opinion of Winston & Strawn with
respect to legality
8.1* Opinion of Winston & Strawn with
respect to tax matters
10.1* Form of Sale and Servicing Agreement
10.2** Form of Administration Agreement
10.3* Form of Transfer and Sale Agreement
23.1* Consent of Winston & Strawn (included in
Exhibit 5.1)
24.1* Power of Attorney (included on signature
page)
25.1* Statement of Eligibility and
Qualification of Indenture Trustee
99.1* Form of Agreement to Deposit Contracts
99.2* Form of Security Agreement
</TABLE>
- ------------------------
* Previously filed.
** Exhibit filed herein replaces exhibit previously filed with Amendment No.
1 to this Registration Statement on Form S-3 (File No. 333-21793).
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules
and regulations prescribed by the Commission under Section 305(b)(2) of the
Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago, the State of Illinois, on
April 7, 1997.
EAGLEMARK, INC.
BY: Donna F. Zarcone *
-----------------------------------------
NAME: STEVEN F. DELI
TITLE: CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
The undersigned directors and officers of Eaglemark, Inc. do hereby
constitute and appoint Steven F. Deli and Donna F. Zarcone, and each of them,
with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all instruments
for us and in our names in the capacities indicated below which such person
may deem necessary or advisable to enable the Registrant and Eaglemark, Inc.
to comply with the Securities Act of 1933 (the "Act"), as amended, and any
rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for us, or any
of us, in the capacities indicated below and any and all amendments
(including pre-effective and post-effective amendments or any other
registration statement filed pursuant to the provisions of Rule 462(b) under
the Act) hereto; and we do hereby ratify and confirm all that such person or
persons shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- ------------------
/s/ DONNA F. ZARCONE Chief Executive Officer and
- ------------------------------ Director (Principal April 7, 1997
* Steven F. Deli Executive Officer)
Chief Financial Officer
/s/ DONNA F. ZARCONE (Principal Financial and
- ------------------------------ Accounting Officer) April 7, 1997
Donna F. Zarcone
/s/ DONNA F. ZARCONE
- ------------------------------ Director April 7, 1997
* Jeffrey L. Bleustein
/s/ DONNA F. ZARCONE
- ------------------------------ Director April 7, 1997
* Michael Bozic
/s/ DONNA F. ZARCONE
- ------------------------------ Director April 7, 1997
* Richard F. Teerlink
* Donna F. Zarcone executed for such person pursuant to a Power of Attorney
appointing her attorney-in-fact for such person filed with the Commission
pursuant to this Registration Statement.
II-5
<PAGE>
Registration No. 333--21793
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUSTS
(Issuer with respect to the Securities)
EAGLEMARK, INC.
(Sponsor of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
-------------------
EXHIBIT VOLUME
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
1.1* Form of Underwriting Agreement
3.1* Restated Certificate of Incorporation of the
Company
3.2* Bylaws of the Company
4.1* Form of Trust Agreement (including form of
Certificates)
4.2* Form of Pooling and Servicing Agreement
(including form of Certificates)
4.3** Form of Indenture (including form of Notes)
5.1* Opinion of Winston & Strawn with respect to
legality
8.1* Opinion of Winston & Strawn with respect to
tax matters
10.1* Form of Sale and Servicing Agreement
10.2** Form of Administration Agreement
10.3* Form of Transfer and Sale Agreement
23.1* Consent of Winston & Strawn (included in
Exhibit 5.1)
24.1* Power of Attorney (included on signature page)
25.1* Statement of Eligibility and Qualification of
Indenture Trustee
99.1* Form of Agreement to Deposit Contracts
99.2* Form of Security Agreement
</TABLE>
- ------------------------
* Previously filed.
** Exhibit filed herein replaces exhibit previously filed with Amendment No.
1 to this Registration Statement on Form S-3 (File No. 333-21293).
i
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
HARLEY-DAVIDSON EAGLEMARK OWNER TRUST___,
as Issuer,
and
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely in its capacity
as Indenture Trustee
-----------------------------------
INDENTURE
Dated as of ______
-----------------------------------
$[ ] Harley-Davidson Motorcycle Contract Backed Notes, Class A-1
$[ ] Harley-Davidson Motorcycle Contract Backed Notes, Class A-2
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.10
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08; 6.11; 11.04
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.13
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.13
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.03
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.06
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02; 6.02; 11.01
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.05
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.12; 6.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.14
316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.08
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.03; 5.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.03
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.18
- ----------------------
* N.A. means Not Applicable
* This Cross-Reference Table shall not, for any purpose, be deemed to be
apart of the Indenture.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.......................................................................1
Section 1.02. Incorporation by Reference of Trust Indenture Act.................................7
Section 1.03. Rules of Construction.............................................................7
ARTICLE TWO
THE NOTES
Section 2.01. Form..............................................................................9
Section 2.02. Execution, Authentication and Delivery............................................9
Section 2.03. Temporary Notes...................................................................9
Section 2.04. Registration; Registration of Transfer and Exchange...............................9
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes.......................................11
Section 2.06. Persons Deemed Owner.............................................................12
Section 2.07. Payment of Principal and Interest; Defaulted Interest............................12
Section 2.08. Cancellation.....................................................................12
Section 2.09. Book-Entry Notes.................................................................13
Section 2.10. Notices to Clearing Agency.......................................................13
Section 2.11. Definitive Notes.................................................................13
Section 2.12. Release of Collateral............................................................14
Section 2.13. Tax Treatment....................................................................14
ARTICLE THREE
COVENANTS
Section 3.01. Payment of Principal and Interest................................................14
Section 3.02. Maintenance of Office or Agency..................................................14
Section 3.03. Money for Payments to be Held in Trust...........................................14
Section 3.04. Existence........................................................................15
Section 3.05. Protection of Collateral.........................................................16
Section 3.06. Opinions as to Collateral........................................................16
Section 3.07. Performance of Obligations; Servicing of Contracts...............................16
Section 3.08. Negative Covenants...............................................................17
Section 3.09. Annual Statement as to Compliance................................................18
Section 3.10. Issuer May Consolidate, etc. Only on Certain Terms...............................18
Section 3.11. Successor or Transferee..........................................................19
Section 3.12. No Other Business................................................................19
Section 3.13. No Borrowing.....................................................................19
Section 3.14. Servicer's Obligations...........................................................20
Section 3.15. Guarantees, Loans Advances and Other Liabilities.................................20
Section 3.16. Capital Expenditures.............................................................20
Section 3.17. Restricted Payments..............................................................20
Section 3.18. Notice of Events of Default......................................................20
Section 3.19. Further Instruments and Acts.....................................................20
Section 3.20. Compliance with Laws.............................................................20
Section 3.21. Amendments of Sale and Servicing Agreement and Trust Agreement...................20
i
<PAGE>
Section 3.22. Removal of Administrator.........................................................20
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture..........................................21
Section 4.02. Application of Trust Money.......................................................21
Section 4.03. Repayment of Moneys Held by Paying Agent.........................................22
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default................................................................22
Section 5.02. Rights Upon Event of Default.....................................................23
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee; Authority of
Indenture Trustee..............................................................................23
Section 5.04. Remedies.........................................................................24
Section 5.05. Optional Preservation of the Contracts...........................................25
Section 5.06. Priorities.......................................................................25
Section 5.07. Limitation of Suits..............................................................26
Section 5.08. Unconditional Rights of Noteholders to Receive Principal and Interest............26
Section 5.09. Restoration of Rights and Remedies...............................................26
Section 5.10. Rights and Remedies Cumulative...................................................27
Section 5.11. Delay or Omission Not a Waiver...................................................27
Section 5.12. Control by Noteholders...........................................................27
Section 5.13. Waiver of Past Defaults..........................................................27
Section 5.14. Undertaking for Costs............................................................27
Section 5.15. Waiver of Stay or Extension Laws.................................................28
Section 5.16. Action on Notes..................................................................28
Section 5.17. Performance and Enforcement of Certain Obligations...............................28
ARTICLE SIX
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee......................................................28
Section 6.02. Rights of Indenture Trustee......................................................29
Section 6.03. Individual Rights of Indenture Trustee...........................................30
Section 6.04. Indenture Trustee's Disclaimer...................................................30
Section 6.05. Notice of Defaults...............................................................30
Section 6.06. Reports by Indenture Trustee to Holders..........................................30
Section 6.07. Compensation and Indemnity.......................................................31
Section 6.08. Replacement of Indenture Trustee.................................................31
Section 6.09. Successor Indenture Trustee by Merger............................................32
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee................32
Section 6.11. Eligibility......................................................................33
Section 6.12. Pennsylvania Motor Vehicle Sales Finance Act Licenses............................33
Section 6.13. Preferential Collection of Claims Against Issuer.................................33
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders...........34
ii
<PAGE>
Section 7.02. Preservation of Information: Communication to Noteholders........................34
Section 7.03. Reports by Issuer................................................................34
Section 7.04. Reports by Indenture Trustee.....................................................34
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money..............................................................35
Section 8.02. Trust Accounts...................................................................35
Section 8.03. General Provisions Regarding Accounts............................................36
Section 8.04. Release of Collateral..........................................................36
Section 8.05. Opinion of Counsel.............................................................36
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.........................37
Section 9.02. Supplemental Indentures With Consent of Noteholders..............................38
Section 9.03. Execution of Supplemental Indentures.............................................39
Section 9.04. Effect of Supplemental Indenture.................................................39
Section 9.05. Conformity With Trust Indenture Act..............................................39
Section 9.06. Reference in Notes to Supplemental Indentures....................................39
ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01. Redemption....................................................................39
Section 10.02. Form of Redemption Notice.....................................................40
Section 10.03. Notes Payable on Redemption Date...............................................40
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.......................................41
Section 11.02. Form of Documents Delivered to Indenture Trustee................................42
Section 11.03. Acts of Noteholders.............................................................43
Section 11.04. Notices.........................................................................43
Section 11.05. Notices to Noteholders; Waiver..................................................45
Section 11.06. Alternate Payment and Notice Provisions........................................45
Section 11.07. Effect of Headings and Table of Contents........................................45
Section 11.08. Successors and Assigns..........................................................45
Section 11.09. Separability....................................................................45
Section 11.10. Benefits of Indenture...........................................................45
Section 11.11. Legal Holidays..................................................................45
Section 11.12. Governing Law...................................................................46
Section 11.13. Counterparts....................................................................46
Section 11.14. Recording of Indenture..........................................................46
Section 11.15. Trust Obligation................................................................46
Section 11.16. No Petition.....................................................................46
Section 11.17. Inspection......................................................................46
Section 11.18. Conflict with Trust Indenture Act...............................................46
iii
<PAGE>
EXHIBITS
Exhibit A - Form of Sale and Servicing Agreement.............................................................A-1
Exhibit B - Form of Class A-1 Note...........................................................................B-1
Exhibit C - Form of Class A-2 Note...........................................................................C-1
Exhibit D - Form of Note Assignment..........................................................................D-1
Exhibit E - Form of Note Depository Agreement................................................................E-1
</TABLE>
iv
<PAGE>
Indenture, dated as of________ (this "Indenture"), between
Harley-Davidson Eaglemark Owner Trust ____, a Delaware business trust (the
"Issuer") and Harris Trust and Savings Bank in its capacity as indenture trustee
(the "Indenture Trustee") and not in its individual capacity.
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Issuer's [ ]%
Harley-Davidson Motorcycle Contract Backed Notes, Class A-1 (the "Class A-1
Notes") and [ ]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-2
(the "Class A-2 Notes" and, together with the Class A-1 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby grants, transfers, assigns and otherwise conveys to
the Indenture Trustee on the Closing Date, on behalf of and for the benefit of
the Holders of the Notes, without recourse, all of the Issuer's right, title and
interest (exclusive of the amount, if any, allocable to any rebatable insurance
premium financed by any Contract) in, to and under (i) the Initial Contracts and
Subsequent Contracts secured by the Motorcycles (which Contracts shall be listed
in the List of Contracts and Subsequent List of Contracts); (ii) certain monies
due under the Initial Contracts and Subsequent Contracts on and after the
Initial Cut-Off Date and Subsequent Cut-Off Date, respectively, including,
without limitation, all payments of principal and interest with respect to any
Motorcycles to which a Contract relates received on or after the Initial Cut-Off
Date or Subsequent Cut-Off Date and all other proceeds received on or in respect
of such Contracts (other than payments of principal and interest due prior to
the Initial Cut-Off Date or Subsequent Cut-Off Date); (iii) security interests
in the Motorcycles; (iv) amounts on deposit in the Collection Account, the Note
Distribution Account, the Reserve Fund, the Pre- Funding Account and the
Interest Reserve Account, including all Eligible Investments therein and all
income from the investment of funds therein and all proceeds therefrom; (v)
proceeds from claims under certain insurance policies in respect of individual
Motorcycles or obligors under the Contracts; (vi) certain rights under the Sale
and Servicing Agreement; (vii) the protective security interest in certain of
the above-described property granted by the Trust Depositor in favor of the
Issuer; (viii) all present and future claims, demands, causes of and choses in
action in respect of any or all of the foregoing; and (ix) all payments on or
under and all proceeds of every kind and nature whatsoever in respect of any or
all of the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash of other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing (as each such defined term is defined in
Section 1.01) (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction and all other
sums owing by the Issuer hereunder or under any other Transaction Document, and
to secure compliance with the provisions of this Indenture, all as provided in
this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Indenture.
<PAGE>
"Act" shall have the meaning specified in Section 11.03(a).
"Administration Agreement" means the Administration Agreement, dated as
of the date hereof, among the Administrator, the Issuer, the Trust Depositor and
the Indenture Trustee.
"Administrator" means Eaglemark, Inc. or any successor Administrator
under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Book Entry Notes" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.09.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banking institutions in the city of Chicago, Illinois, Wilmington,
Delaware or New York, New York are authorized or obligated by law, executive
order or governmental decree to be closed.
"Certificate Final Distribution Date" means the April 2004
Distribution Date.
"Certificate of Trust" means the Certificate of Trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Class A-1 Final Distribution Date" means the April 2001
Distribution Date.
"Class A-1 Rate" means [ ]% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"Class A-1 Notes" means the Class A-1 Notes, substantially in the form
of Exhibit A.
"Class A-2 Final Distribution Date" means the April 2003
Distribution Date.
"Class A-2 Rate" means [ ]% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"Class A-2 Notes" means the Class A-2 Notes, substantially in the form
of Exhibit B.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
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"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means _____.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means the Collateral Granted to the Indenture Trustee
under this Indenture, including all proceeds thereof.
"Commission" means the Securities and Exchange Commission.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trusts business shall be
administered which office at date of the execution of this Agreement is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, Attention:
Indenture Trust Administration; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee (the address of which the successor Indenture Trustee will notify the
Noteholders and the Issuer).
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" shall have the meaning specified in Section 2.09.
"Distribution Date" means the fifteenth day of each month or, if such
date shall not be a Business Day, the next succeeding Business Day, commencing
______.
"DTC" means The Depository Trust Company, and its successors.
"Eaglemark" means Eaglemark, Inc., and its successors and assigns.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
"Event of Default" shall have the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"General Partner" means each Certificateholder obligated to pay the
expenses of the Issuer pursuant to Section 2.07 of the Trust Agreement.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise and
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generally to do and receive anything that the granting party is or may be
entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" or "Note Owner" means, with respect to a
Book-Entry Note, the Person who is the owner of such Book-Entry Note, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency) and with respect to a Definitive Note the Person
in whose name a Note is registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (i)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (ii)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (iii) current liabilities of such Person in respect of
unfunded vested benefits under plans covered by Title IV of ERISA; (iv)
obligations issued for or liabilities incurred on the account of such Person;
(v) obligations or liabilities of such Person arising under acceptance
facilities; (vi) obligations of such Person under any guaranties, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or otherwise to assure a creditor against
loss; (vii) obligations of such Person secured by any lien on property or assets
of such Person, whether or not the obligations have been assumed by such Person;
or (viii) obligations of such Person under any interest rate or currency
exchange agreement.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indenture Securities" means the Notes.
"Indenture Security Holder" means a Noteholder.
"Indenture Trustee" means Harris Trust and Savings Bank, as Indenture
Trustee under this Indenture, or any successor Indenture Trustee under this
Indenture.
"Independent" means, when used with respect to any specified Person,
that the Person (i) is in fact independent of the Issuer, any other obligor upon
the Notes, the Trust Depositor, the Seller and any of their respective
Affiliates, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller or
any of their respective Affiliates, and (iii) is not connected with the Issuer,
any such other obligor, the Seller or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, made by
an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Interest Period" means, with respect to any Distribution Date and any
Class of Notes, the period from and including the fifteenth day of the month of
the Distribution Date immediately preceding such Distribution Date (or, in the
case of the first Distribution Date, the Closing Date) to but excluding the
fifteenth day of the month of such Distribution Date.
"Interest Rate" means the Class A-1 Rate and the Class A-2 Rate, as
applicable.
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"Issuer" means Harley-Davidson Eaglemark Owner Trust _____ until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Note" means a Class A-1 Note or a Class A-2 Note.
"Note Depository Agreement" means the agreement dated as of the Closing
Date, among the Issuer, the Administrator, the Indenture Trustee and DTC, as the
initial Clearing Agency, relating to the Notes, substantially in the form of
Exhibit E hereto.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee
and which shall comply with any applicable requirements of Section 11.01, and
shall be in form and substance satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the
Indenture Trustee or any Paying Agent in trust for the Holders of such
Notes (provided, however, that if such Notes are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or
provision for such notice has been made, satisfactory to the Indenture
Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser;
provided, however, that in determining whether the Holders of the requisite
Outstanding Amount have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any other Transaction Document,
Notes owned by the Issuer, any other obligor upon the Notes, the Trust
Depositor, Eaglemark or any of their respective Affiliates shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the
Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned
that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Trust Depositor, Eaglemark or any
of their respective Affiliates.
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"Outstanding Amount" means the aggregate principal amount of all Notes
of one Class or of all Classes, as the case may be, Outstanding at the date of
determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make the distributions from the Note
Distribution Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"Rating Agency" means each of Moody's and Standard & Poor's.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given ten days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each Rating
Agency shall have notified the Trust Depositor, the Servicer and the Issuer in
writing that such action will not result in a qualification, reduction or
withdrawal of its then-current rating of any Class of Notes.
"Rating Event" means the qualification, reduction or withdrawal by
either Rating Agency of its then-current rating of any Class of Notes.
"Record Date" means, with respect to a Distribution Date or Redemption
Date, the close of business on the last Business Day of the immediately
preceding month.
"Redemption Date" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
10.01(b), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.01(a) or 10.01(b), as the case may be and (b) in the case of a
redemption of Notes pursuant to Section 10.01, the Distribution Date specified
in Section 7.07 of the Sale and Servicing Agreement on which the Indenture
Trustee shall withdraw any amount remaining in the Pre-funding Account and
deposit the applicable amount in the Note Distribution Account.
"Redemption Date Amount" means (i) in the case of a redemption of the
Notes pursuant to Section 10.01(a), an amount equal to the unpaid principal
amount of the Notes redeemed plus accrued and unpaid interest thereon at the
weighted average of the Interest Rate for each Class of Notes being so redeemed
to but excluding the Redemption Date, or (ii) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (i)
above.
"Registered Holder" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office (or any successor group of the
Indenture Trustee), including any Vice President, assistant secretary or other
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officer or assistant officer of the Indenture Trustee customarily performing
functions similar to those performed by the people who at such time shall be
officers, respectively, or to whom any corporate trust matter is referred at the
Corporate Trust Office of the Indenture Trustee because of his knowledge of and
familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of the date hereof, among the Issuer, the Trust Depositor and the
Servicer, substantially in the form of Exhibit A hereto.
"Seller" means Eaglemark, in its capacity as Seller under the Sale and
Servicing Agreement, and any successors and assigns.
"Servicer" means Eaglemark, in its capacity as Servicer under the Sale
and Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the 50 states of the United States, or
the District of Columbia or any of its territories.
"Successor Servicer" shall have the meaning specified in Section
3.07(e).
"Termination Date" means the date on which the Indenture Trustee shall
have received payment and performance of all amounts and obligations which the
Issuer may owe to or on behalf of the Indenture Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
as of the date hereof, between the Trust Depositor and the Owner Trustee.
"Trust Depositor" shall mean Eaglemark Customer Funding
Corporation-___, in its capacity as trust depositor under the Sale and Servicing
Agreement, and its successors.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"United States" means the United States of America.
Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used herein that are not otherwise defined
shall have the meanings ascribed thereto in the Sale and Servicing Agreement.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
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All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaing assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with
generally accepted accounting principles as in effect from
time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words
in the plural include the singular.
(vi) any agreement, instrument or statute defined
or referred to herein or in any instrument
or certificate delivered in connection herewith means such agreement,
instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated
therein; references to a Person are also to its permitted successors
and assigns; and
(vii) the words "hereof," "herein" and "hereunder"
and words of similar import when used in this
Indenture shall refer to this Indenture as a whole and not to
any particular provision of this Indenture; Section, subsection and
Schedule references contained in this Indenture are references to
Sections, subsections and Schedules in or to this Indenture unless
otherwise specified.
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ARTICLE TWO
THE NOTES
Section 2.01. Form. The Class A-1 Notes and the Class A-2 Notes, in each
case together with the Indenture Trustee's certificate of authentication, shall
be in substantially the forms set forth as Exhibits to this Indenture with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution of the Notes. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibits hereto are part of the terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile. Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall, upon receipt of an Issuer Order, authenticate
and deliver for original issue (i) Class A-1 Notes in an aggregate principal
amount of $[ ], and (ii) Class A-2 Notes in an aggregate principal amount of $[
]. The aggregate principal amount of Class A-1 Notes, and Class A-2 Notes
Outstanding at any time may not exceed such respective amounts, except as
otherwise provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $500,000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein by the Indenture
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
Section 2.03. Temporary Notes. Pending the preparation of Book-Entry Notes
or Definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order
the Indenture Trustee shall authenticate and deliver, temporary Notes that are
printed, lithographed, typewritten, mimeographed or otherwise produced, of the
tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Issuer will cause Book-Entry Notes or
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Book-Entry Notes or Definitive Notes, the temporary Notes shall
be exchangeable for Book-Entry Notes or Definitive Notes upon surrender of the
temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more Notes, the Issuer shall execute and the
Indenture Trustee shall authenticate and deliver in exchange therefor a like
tenor and principal amount of definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Book-Entry Notes or Definitive Notes.
Section 2.04. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall
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provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and the amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of the
same Class in any authorized denominations, of a like aggregate amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located in the city in which the Corporate Trust Office is
located, or by a member firm of a national securities exchange, and such other
documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.03 not involving
any transfer.
The preceding provisions of this Section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
(i) the Note Registrar and the Trustee will be entitled to deal with the
Clearing Agency for all purposes of this Indenture (including the payment of
principal of and interest on the Notes and the giving of instructions or
directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Note Owners;
(ii) the rights of Note Owners will be exercised only through the Clearing
Agency and will be limited to those established by law and agreements between
such Note Owners and the Clearing Agency and/or the Clearing Agency Participants
pursuant to the Depository Agreement;
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(iii) whenever this Indenture requires or permits actions to be taken based
upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Outstanding Amount of the Notes, the Clearing Agency will be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the Trustee; and
(iv) without the consent of the Issuer and the Trustee, no such Note may be
transferred by the Depository except to a successor Depository that agrees to
hold such Note for the account of the Owners or except upon the election of the
Owner thereof or a subsequent transferee to hold such Note in physical form.
Neither the Trustee nor the Registrar shall have any responsibility to monitor
or restrict the transfer of beneficial ownership in any Note an interest in
which is transferable through the facilities of the Depository.
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by them to hold the Issuer and the Indenture
Trustee, then, in the absence of notice to the Issuer, the Note Registrar or the
Indenture Trustee that such Note has been acquired by a bona fide purchaser, the
Issuer shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, and the Indenture Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer or
the Indenture Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost of stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 2.06. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, and any
of their respective agents may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Indenture Trustee nor any of their respective agents
shall be affected by notice to the contrary.
Section 2.07. Payment of Principal and Interest; Defaulted Interest.
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(a) Each Class of Notes shall accrue interest at the related Interest Rate,
and such interest shall be payable on each Distribution Date as specified
therein, subject to Section 3.01. Any installment of interest or principal, if
any, payable on any Note which is punctually paid or duly provided for by the
Issuer on the applicable Distribution Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered on the Record
Date, by wire transfer in immediately available funds to the account designated
by such nominee and except for the final installment of principal payable with
respect to such Note on a Distribution Date or on the related Final Distribution
Date, as the case may be (and except for the Redemption Price for any Note
called for redemption pursuant to Section 10.01(a)), which shall be payable as
provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable on each Distribution Date
to the extent provided in the form of the related Note set forth as an Exhibit
hereto. Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes shall be due and payable, if not previously paid, on the date on which an
Event of Default shall have occurred and be continuing, unless the Holders of
Notes representing not less than 66-2/3% of the Outstanding Amount have waived
such Event of Default in the manner provided in Section 5.02. All principal
payments on each Class of Notes shall be made pro rata to the Noteholders of
such Class entitled thereto. The Indenture Trustee shall notify the Person in
whose name a Note is registered at the close of business on the Record Date
preceding the Distribution Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such notice
shall be mailed within five Business Days of receipt of notice of termination of
the Trust pursuant to Section 9.01(c) of the Trust Agreement and shall specify
that such final installment will be payable only upon presentation and surrender
of such Note and shall specify the place where such Note may be presented and
surrendered for payment of such installment. Notices in connection with
redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the related payment date. The Issuer shall fix or cause to be fixed any
such special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to the Indenture Trustee and each
Noteholder a notice that states the special record date, the payment date and
the amount of defaulted interest to be paid.
Section 2.08. Cancellation. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly cancelled by the Indenture Trustee. The Issuer may at any time deliver
to the Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly cancelled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Order that they
be destroyed or returned to it; provided that such Issuer Order is timely and
the Notes have not been previously disposed of by the Indenture Trustee.
Section 2.09. Book-Entry Notes. The Notes, upon original issuance, will be
issued in the form of a typewritten Note or Notes representing the Book-Entry
Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the
Issuer. Such Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no
Noteholder will receive a Definitive Note representing such Noteholder's
interest in such Note, except as provided in Section 2.11. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Noteholders pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force
and effect;
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(ii) the Note Registrar and the Indenture Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of the
Notes, and shall have no obligation to the Noteholders;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Noteholders shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Noteholders and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Note Depository Agreement,
unless and until Definitive Notes are issued pursuant to Section 2.11, the
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest
on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Noteholders evidencing a specified
percentage of the Outstanding Amount, the Clearing Agency shall be deemed
to represent such percentage only to the extent that it has received
instructions to such effect from Noteholders and/or Clearing Agency
Participants owning or representing, respectively, such required percentage
of the beneficial interest in the Notes and has delivered such instructions
to the Indenture Trustee.
Section 2.10. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Noteholders pursuant to Section
2.11, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders of the Notes to the Clearing Agency,
and shall have no obligation to the Noteholders.
Section 2.11. Definitive Notes. If (i)(A) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities as described in the Note
Depository Agreement, and (B) Indenture Trustee or the Administrator is unable
to locate a qualified successor, (ii) the Administrator at its option advises
the Indenture Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency, or (iii) after the occurrence of an Event of
Default, the Noteholders representing not less than 66 2/3% of the Outstanding
Amount of such Class of Notes advises the Indenture Trustee and the Clearing
Agency through the Clearing Agency Participants in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interests of the related Noteholders, then the Indenture Trustee shall notify
all Noteholders of the related Class of Notes, through the Clearing Agency, of
the occurrence of any such event and of the availability of Definitive Notes of
the related Class of Notes to Noteholders requesting the same. Upon surrender to
the Indenture Trustee of the Note or Notes representing the Book-Entry Notes by
the Clearing Agency, accompanied by registration instructions, the Issuer shall
execute and the Indenture Trustee shall authenticate the Definitive Notes in
accordance with the instructions of the Clearing Agency. None of the Issuer, the
Note Registrar or the Indenture Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes of a Class, the Indenture Trustee shall recognize the Noteholders of the
Definitive Notes as Noteholders hereunder.
The Indenture Trustee shall not be liable if the Indenture Trustee or the
Administrator is unable to locate a qualified successor Clearing Agency. The
Definitive Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Section 2.12. Release of Collateral. Subject to Section 11.01 and the terms
of the Transaction Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt of an Issuer Request accompanied by
an Officer's Certificate.
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Section 2.13. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer secured by the Collateral. The Issuer, by entering
into this Indenture, and each Noteholder, by its acceptance of its Note agree to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
ARTICLE THREE
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to Section 8.02(c), the Issuer will cause to be distributed all amounts
on deposit in the Note Distribution Account on a Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the
Class A-1 Notes, to the Class A-1 Noteholders, and (ii) for the benefit of the
Class A-2 Notes, to the Class A-2 Noteholders. Amounts properly withheld under
the Code by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.
Section 3.02. Maintenance of Office or Agency. The Issuer will maintain in
Wilmington, Delaware, an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments to be Held in Trust. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account and the
Note Distribution Account pursuant to Section 8.02(b) shall be made on behalf of
the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts
so withdrawn from the Collection Account and the Note Distribution Account for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
On or before the Business Day immediately preceding each Distribution Date
and Redemption Date, the Issuer shall deposit or cause to be deposited in the
Note Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall
promptly notify the Indenture Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer
(or any other obligor upon the Notes) in the making of any payment required
to be made with respect to the Notes;
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(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
upon receipt of an Issuer Request shall be deposited by the Indenture Trustee in
the Collection Account; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof, and all
liability of the Indenture Trustee or such Paying Agent with respect to such
trust money shall thereupon cease; provided, however, that if such money or any
portion thereof had been previously deposited by the Issuer with the Indenture
Trustee for the payment of principal or interest on the Notes, and provided,
further, that the Indenture Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Issuer cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to or for the
account of the Issuer. The Indenture Trustee may also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but not have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
Section 3.04. Existence. The Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Collateral.
Section 3.05. Protection of Collateral. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Indenture Trustee on
behalf of the Noteholders to be prior to all other liens in respect of the
Collateral, and the Issuer shall take all actions necessary to obtain and
maintain, for the benefit of the Indenture Trustee on behalf of the Noteholders,
a first lien on and a first priority, perfected security interest in the
Collateral. The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
all as prepared by the Servicer and delivered to the Issuer, and will take such
other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Collateral;
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(ii) maintain or preserve the lien and security interest (and the
priority thereof) created by this Indenture or carry out more effectively
the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Collateral and
the rights of the Indenture Trustee and
the Noteholders in such Collateral against the claims of
all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Collateral when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute all financing statements, continuation statements or
other instruments required to be executed pursuant to this Section.
Section 3.06. Opinions as to Collateral.
(a) Promptly after the execution and delivery of this Indenture, the Issuer
shall furnish to the Indenture Trustee an Opinion of Counsel to the effect that,
in the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the collateral for the benefit of the Noteholders, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) no such action shall be necessary to perfect such
security interest; and
(b) Within 90 days after beginning of each calendar year beginning with the
first calendar year beginning more than three months after the Cut-Off Date, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel, dated as of
a date during such 90-day period, to the effect that, in the opinion of such
counsel, either (i) all financing statements and continuation statements have
been executed and filed that are necessary to create and continue the Indenture
Trustee's first priority perfected security interest in the collateral (subject
to the rights of the Insurer under the Insurance Agreement) for the benefit of
the Noteholders, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) no such action
shall be necessary to perfect such security interest.
Section 3.07. Performance of Obligations; Servicing of Contracts.
(a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any such Person's material covenants or obligations under any instrument or
agreement included in the Collateral or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in the Transaction Documents or such other instrument or
agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties and obligations under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee in an Officer's
Certificate shall be deemed to be action taken by the Issuer. The Indenture
Trustee shall not be responsible for the action or inaction of the Servicer or
the Administrator. Initially, the Issuer has contracted with the Servicer and
the Administrator to assist the Issuer in performing its duties under this
Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the other Transaction Documents and
in the instruments and agreements included in the Collateral, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
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provided for herein and therein. Except as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify, supplement or terminate any
Transaction Document or any provision thereof without the consent of the
Indenture Trustee or the Holders of at least a majority of the Outstanding
Amount.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Termination, the Issuer shall promptly notify the Indenture Trustee and each
Rating Agency thereof. Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee. As soon as a successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee and the Rating Agencies of such appointment,
specifying in such notice the name and address of such successor Servicer.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Transaction Documents if the effect thereof would adversely affect the Holders
of the Notes.
Section 3.08. Negative Covenants. Until the Termination Date, the
Issuer shall not:
(i) except as expressly permitted by the Transaction Documents,
sell, transfer, exchange or otherwise dispose of any of the properties or
assets of the Issuer, including those included in the Collateral, unless
directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code or applicable state law) or
assert any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Collateral; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien created by this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenant; or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Collateral or any part
thereof or any interest therein or the proceeds thereof (other than tax
liens, mechanics' liens and other liens that arise by operation of law, in
each case on a Motorcycle and arising solely as a result of an action or
omission of the related Obligor), (C) permit the lien created by this
Indenture not to constitute a valid first priority (other than with respect
to any such tax, mechanics' or other lien) security interest in the
Collateral, or (D) amend, modify or fail to comply with the provisions of
the Transaction Documents without the prior written consent of the
Indenture Trustee, except where the Transaction Documents allow for
amendment or modification without the consent or approval of the Indenture
Trustee; or
(iv) dissolve or liquidate in whole or in part.
Section 3.09. Annual Statement as to Compliance. The Issuer will deliver to
the Indenture Trustee, on or before 120 days after the end of each fiscal year
of the Issuer (commencing with the fiscal year ended December 31, 1996), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and of
performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in the compliance of any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status thereof.
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Section 3.10. Issuer May Consolidate, etc. Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing under
the laws of the United States or any State and shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Indenture
Trustee, in form and substance satisfactory to the Indenture Trustee, the
due and punctual payment of the principal of and interest on all Notes and
the performance or observance of every agreement and covenant of this
Indenture and each other Transaction Document on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Indenture Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions will
be taken) each stating that such consolidation or merger and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction have
been compiled with; and
(vii) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (A) greater than zero and (B) not less
than the net worth of the Issuer immediately prior to giving effect to such
consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all of its
properties or assets, including those included in the Collateral, to any Person
(except as expressly permitted by the Transaction Documents), unless:
(i) the Person that acquires by conveyance to transfer the
properties and assets of the Issuer shall (A) be a United States citizen or
a Person organized and existing under the laws of the United States or any
State, (B) expressly assume, by an indenture supplemental hereto, executed
and delivered to the Indenture Trustee, in form and substance satisfactory
to the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture and each other Transaction
Document on the part of the Issuer to be performed or observed, all as
provided herein, (C) expressly agree by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes and
(D) unless otherwise provided in such supplemental indenture, expressly
agree to indemnify, defend and hold harmless the Issuer against and from
any loss, liability or expense arising under or related to this Indenture
and the Notes.
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
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(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Indenture Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions will
be taken) each stating that such conveyance or transfer and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filings required by Exchange Act); and
(vii) the Issuer has a net worth, immediately after such conveyance or
transfer, that is (A) greater than zero and (B) not less than the net worth
of the Issuer immediately prior to giving effect to such conveyance or
transfer.
Section 3.11. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with same
effect as if such Person has been named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all the assets or
properties of the Issuer pursuant to Section 3.10(b), the Issuer will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery of written notice to the Indenture Trustee stating that the Issuer
is to be so released.
Section 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the other Transaction
Documents and activities incidental thereto.
Section 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes and (ii) any other Indebtedness permitted
by or arising under the other Transaction Documents. The proceeds of the Notes
and the Certificates shall be used exclusively to fund the Issuer's purchase of
the Contracts and the other assets specified in the Sale and Servicing
Agreement, to fund the Reserve Fund and to pay the transactional expenses of the
Issuer.
Section 3.14. Servicer's Obligations. The Issuer shall cause the Servicer
to comply with Sections 4.09, 4.10, 4.11, as well as Article Five and Article
Nine of the Sale and Servicing Agreement.
Section 3.15. Guarantees, Loans Advances and Other Liabilities. Except as
otherwise contemplated by the Transaction Documents, the Issuer shall not make
any loan or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuming another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, any
other interest in, or make any capital contribution to, any other Person.
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Section 3.16. Capital Expenditures. The Issuer shall not make
any expenditure (by long-term or operating lease or otherwise) for
capital assets (either reality or personalty).
Section 3.17. Restricted Payments. Except as permitted by the Transaction
Documents, the Issuer shall not, directly or indirectly, (i) pay any dividend or
make any distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, to the Owner Trustee or any owner
of a beneficial interest in the Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Issuer or to the Servicer,
(ii) redeem, purchase, retire or otherwise acquire for value any such ownership
or equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
cause to be made, (A) distributions to the Servicer, the Owner Trustee and the
Certificateholders as contemplated by, and to the extent funds are available for
such purpose under, the Sale and Servicing Agreement or the Trust Agreement and
(B) payments to the Indenture Trustee and the Owner Trustee pursuant to Section
1(a)((ii) of the Administration Agreement. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the other Transaction Documents.
Section 3.18. Notice of Events of Default. The Issuer agrees to give the
Indenture Trustee and each Rating Agency prompt written notice of each Event of
Default hereunder and an Event of Termination under the Sale and Servicing
Agreement.
Section 3.19. Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 3.20. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other Transaction Document.
Section 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 11.01 of the
Trust Agreement to eliminate the requirements thereunder that the Indenture
Trustee or the Holders of the Notes consent to amendments thereto as provided
therein.
Section 3.22. Removal of Administrator. So long as any Notes are issued and
outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon,
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(iv) Sections 3.01, 3.03, 3.04, 3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20 and
3.21, (v) the rights, obligations and immunities of the Indenture Trustee
hereunder (including the rights of the Indenture Trustee under Section 6.07 and
the obligations of the Indenture Trustee under Section 4.02) and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when
(A) either
(1) all Notes therefore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.05 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation and the Note
Policy has expired and been returned to the Insurer for cancellation;
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
Class A-2 Final Distribution Date within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States (which will mature prior to the date
such amounts are payable), in trust in an Eligible Account for such
purpose, in an amount sufficient to pay and discharge the entire
indebtedness on such Note not theretofore delivered to the Indenture
Trustee for cancellation when due to the final scheduled Distribution
Date (if Notes shall have been called for redemption pursuant to
Section 10.01(a)), as the case may be;
(B) the Issuer has paid or performed or caused to be paid or performed
all amounts and obligations which the Issuer may owe to or on behalf of the
Indenture Trustee for the benefit of the Noteholders under this Indenture
or the Notes; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have bene
complied with and the Rating Agency Condition has been satisfied.
Section 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Indenture Trustee
may determine, to the Holders of the particular Notes for the payment or
redemption of which such moneys have been deposited with the Indenture Trustee,
of all sums due and to become due thereon for principal and interest; but such
moneys need not be segregated from other funds except to the extent required
herein or in the Sale and Servicing Agreement or required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture
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Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
Section 4.04. Release of Collateral. Subject to Section 11.01 and the terms
of the Transaction Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt of an Issuer Request accompanied by
an Officer's Certificate and an Opinion of Counsel and Independent Certificates
in accordance with TIA SS.314(c) and 314(d)(1) or an Opinion of Counsel in lieu
of such Independent Certificates to the effect that the TIA does not require any
such Independent Certificates.
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any
Note when the same becomes due and
payable, and such default shall continue for a period of five days;
(ii) default in the payment of the principal
of or any installment of the principal of any Note
when the same becomes due and payable;
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered or
certified mail, to the Indenture Trustee by the Holders of at least 25% of
the Outstanding Amount of the Notes, taken together as a single class, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Collateral in an involuntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial part
of the Collateral, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a
voluntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by the Issuer to the entry of an order for relief in
an involuntary case under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Collateral, or the making by the Issuer of any
general assignment for the benefit of creditors, or the failure by the
Issuer generally to pay its debts as such debts become due, or the taking
of action by the Issuer in furtherance of any of the foregoing.
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The Issuer shall deliver to the Indenture Trustee within five days after
obtaining knowledge of the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under clause (iii) above, its status
and what action the Issuer is taking or proposes to take with respect thereto.
Section 5.02. Rights Upon Event of Default
If an Event of Default shall have occurred and be continuing, the Notes
shall become immediately due and payable at par, together with accrued interest
thereon, unless Holders holding Notes representing at least 66-2/3% of the
aggregate Outstanding Amount shall, upon prior written notice to each Rating
Agency, waive such Event of Default.
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee; Authority of Indenture Trustee.
(a) The Issuer covenants that if the Notes are accelerated following the
occurrence of an Event of Default, the Issuer will, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of the Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest, with interest upon the overdue principal, and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue installments
of interest, at the applicable Interest Rate and in addition thereto such
further amount as shall be sufficient to cover costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel.
(b) The Indenture Trustee following the occurrence of an Event of Default,
shall have full right, power and authority to take, or defer from taking, any
and all acts with respect to the administration, maintenance or disposition of
the Collateral.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may in its discretion (except as provided in Section 5.03(d)), proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this Indenture if
an Event of Default shall have occurred and be continuing, if the Issuer fails
to perform its obligations under Section 10.01(b) when and as due, the Indenture
Trustee may in its discretion proceed to protect and enforce its rights and the
rights of the Noteholders by such appropriate proceedings as the Indenture
Trustee shall deem most effective to protect and enforce any such rights,
whether for specific performance of any covenant or agreement in this Indenture
or in aid of the exercise of any power granted herein, or to enforce any other
proper remedy or legal or equitable right vested in the Indenture Trustee by
this Indenture or by law, provided that the Indenture Trustee shall only be
entitled to take any such actions to the extent such actions (i) are taken only
to enforce the Issuer's obligations to redeem the principal amount of Notes, and
(ii) are taken only against the Collateral any investments therein and any
proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Collateral, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made
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any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Trustee except as a result of negligence or bad faith.
(f) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
compensation affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(g) All rights of action and of asserting claims under this Indenture or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any Proceedings brought by the Indenture Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture),
the Indenture Trustee shall be held to represent all of the Holders of the
Notes, and it shall not be necessary to make any Noteholder a party to any such
proceedings.
Section 5.04. Remedies. If an Event of Default shall have occurred and
be continuing the Indenture Trustee (subject to Section 5.05) shall:
(i) institute Proceedings in its own name and as or on behalf of a
trustee of an express trust for the collection of all amounts then payable
on the Notes or under this Indenture with respect thereto,
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whether by declaration or otherwise, enforce any judgment obtained,
and collect from the Issuer and any other obligor upon such
Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and any
other remedy available to the Indenture Trustee and take any other
appropriate action to protect and enforce the rights and remedies of the
Indenture Trustee on behalf of the Noteholders under this Indenture or the
Notes; and
(iv) direct the Owner Trustee to sell the Collateral or any portion
thereof or rights or interest therein, at one or more public or private
sales called and conducted in any manner permitted by law; provided,
however, that the Indenture Trustee may not sell or otherwise liquidate the
Collateral following an Event of Default, other than an Event of Default
described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of the
Outstanding Amount of the Notes, consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that the
Collateral will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have become due if the
Notes had not been declared due and payable, and the Indenture Trustee
provides prior written notice to each Rating Agency and obtains the consent
of Holders of 66-2/3% of the Outstanding Amount of the Notes. In
determining such sufficiency or insufficiency with respect to clauses (B)
and (C), the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm or national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Collateral for such purpose.
Section 5.05. Optional Preservation of the Contracts. Following an Event of
Default and such Event of Default has not been rescinded and annulled, the
Indenture Trustee may, but need not, elect to maintain possession of the
Collateral,. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal and interest
on the Notes, and the Indenture Trustee shall take such desire into account when
determining whether or not to maintain possession of the Collateral. In
determining whether to maintain possession of the Collateral, the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investing banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Collateral
for such purpose.
Section 5.06. Priorities.
(a) If the Indenture Trustee collects any money or property pursuant to
this Article Five, it shall pay out the money or property in the following order
and priority:
(i) amounts due and owing and required to be distributed
to the Servicer, the Owner Trustee and the Indenture Trustee,
respectively, pursuant to priorities
described in Section 7.05(a) of the Sale and Servicing Agreement and not
previously distributed, in the order of such priorities and without
preference or priority of any kind within such priorities;
(ii) to the Holders of the Class A-1 Notes and Class A-2 Notes for
amounts representing due and unpaid interest thereon;
(iii) to Holders of the Notes for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal, until
the Outstanding Amount of the Notes is reduced to zero;
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(iv) amounts due and unpaid on the Certificates
for interest and principal, to the Owner
Trustee for distribution to Certificateholders in
accordance with Section 5.02(a) of the Trust Agreement; and
(v) any excess amounts remaining after making the distributions
described in paragraphs (i) through (iv) above shall be distributed in the
following order of priority: into the Reserve Fund, until the amounts on
deposit therein equal the Specified Reserve Fund Balance, with any excess
being distributed to the Trust Depositor.
(b) The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Issuer shall mail to each Noteholder and the Indenture Trustee
a notice that states the record date, the payment date and the amount to be
paid.
Section 5.07. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice
to the Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to institute
such Proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
a majority of the Outstanding Amount of the Notes, voting together as a
single class.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine that action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.08. Unconditional Rights of Noteholders to Receive Principal and
Interest. Notwithstanding any other provisions in the Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on such Note on or after the respective
due dates thereof expressed in such Note or in this Indenture (or, in the case
of redemption, on or after the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
Section 5.09. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholders has instituted any Proceeding to enforce any right or remedy
under this Indenture and such proceeding has been
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discontinued or abandoned for any reason or has been determined adversely to
the Indenture Trustee or to such Noteholder, then and in every such case the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as through no such Proceeding had
been instituted.
Section 5.10. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default of Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.12. Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with
any rule of law or with this Indenture;
(ii) subject to the terms of Section 5.04, any direction to the
Indenture Trustee to sell or liquidate the Collateral shall be by the
Holders of Notes representing not less than 100% of the Outstanding Amount
of the Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Collateral pursuant to such
Section, then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to sell
or liquidate the Collateral shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially and adversely affect the
rights of any Noteholders not consenting to such action.
Section 5.13. Waiver of Past Defaults. In the case of any waiver of an
Event of Default, the Issuer, the Indenture Trustee and the Holders of the notes
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereto. Upon any such waiver, such Default shall cease to
exist and be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
Section 5.14. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit
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for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (i) any suit instituted by the
Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (iii) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
Section 5.15. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waivers
all benefit or advantages of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Collateral or upon any of
the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.06.
Section 5.17. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee to do so and at
the Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Trust Depositor and the Servicer as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement to the extent and in the
manner directed by the Indenture Trustee, including the transmission of notices
of default on the part of the Trust Depositor or the Servicer thereunder and the
institution of legal of administrative actions or proceedings to compel or
secure performance by the Trust Depositor or the Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing,
including facsimile) of the Holders of 66-2/3% of the Outstanding Amount of the
Notes shall exercise all rights, remedies, powers, privileges and claims of the
Issuer against the Trust Depositor or the Servicer under or in connection with
the Sale and Servicing Agreement, including the right or power to take any
action to compel or secure performance or observance by the Trust Depositor or
the Servicer of each of their obligations to the Issuer thereunder and to give
any consent, request, notice, direction, approval, extension or waiver under the
Sale and Servicing Agreement, and any right of the Issuer to take such action
shall be suspended.
ARTICLE SIX
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee.
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(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
in the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture and the other Transaction
Documents to which the Indenture Trustee is a party.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of Section 6.01(b);
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) The Indenture Trustee shall have no discretionary duties other than
performing those ministerial acts set forth above necessary to accomplish the
purpose of this Trust as set forth in this Indenture.
(i) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this section and to the provisions of the TIA.
Section 6.02. Rights of Indenture Trustee.
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(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate (with respect to factual matters) or an Opinion
of Counsel, as applicable. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the Officer's
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute wilful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes,
pursuant to the provisions of this Indenture, unless such Holders of Notes shall
have offered to the Indenture Trustee reasonable security or indemnity against
the costs, expenses and liabilities that may be incurred therein or thereby;
provided, however, that the Indenture Trustee shall, upon the occurrence of an
Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture in a manner consistent with Section 6.01.
(g) The Indenture Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless so requested by the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes; provided, however,
that if the payment within a reasonable time to the Indenture Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Indenture Trustee, not reasonably
assured to the Indenture Trustee by the security afforded to it by the terms of
this Indenture or the Sale and Servicing Agreement, the Indenture Trustee may
require reasonable indemnity against such cost, expense or liability as a
condition to so proceeding; the reasonable expense of every such examination
shall be paid by the Person making such request, or, if paid by the Indenture
Trustee, shall be reimbursed by the Person making such request upon demand.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee is required to comply with Section 6.11.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Collateral or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
Section 6.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder notice of the Default
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within 90 days after it occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
redemption of such Notes), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. The Issuer shall pay or shall
cause the Administrator to pay to the Indenture Trustee from time to time
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify or shall cause the
Administrator to indemnify the Indenture Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Indenture Trustee shall notify the Issuer and the Administrator
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Administrator shall not relieve the
issuer or the Administrator of its obligations hereunder. The Issuer shall
defend or shall cause the Administrator to defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall pay or shall
cause the Administrator to pay the fees and expenses of such counsel. Neither
the Issuer nor the Administrator need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The issuer's payment obligations to the Indenture Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Servicer. The Issuer
may remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of the
Indenture Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar
law, shall have entered a decree or order granting relief or appointing a
receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or similar official) for the Indenture Trustee or for any
substantial part of the Indenture Trustee's property, or ordering the
winding-up or liquidation of the Indenture Trustee's affairs, provided any
such decree or order shall have continued unstayed and in effect for a
period of 30 consecutive days;
(iii) the Indenture Trustee commences a voluntary case under any
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator or other similar official for the Indenture
Trustee or for any substantial part of the Indenture Trustee's property, or
makes any assignment for the benefit of creditors or fails generally to pay
its debts as such debts become due or takes any corporate action in
furtherance of any of the foregoing; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
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A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The Issuer or the successor
Indenture Trustee shall mail a notice of its succession to Noteholders. The
retiring Indenture Trustee shall promptly transfer all property held by it as
Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the
Notes may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section and payment of all fees and expenses
owed to the outgoing Indenture Trustee. Notwithstanding the replacement of the
Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall
be entitled to payment or reimbursement of such amounts as such Person is
entitled pursuant to Section 6.07.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Insurer and
each Rating Agency prompt notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor Indenture Trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.
(a) Notwithstanding any other provision of this Indenture, at any time, for
the purpose of meeting any legal requirement of any jurisdiction in which any
part of the Collateral may at the time be located, the Indenture Trustee and the
Administrator acting jointly shall have the power and may execute and deliver
all instruments to appoint one or more Persons to act as a co-Indenture Trustee
or co-Indenture Trustees, jointly with the Indenture Trustee, or separate
Indenture Trustee or separate Indenture Trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Collateral, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee and the Administrator
may consider necessary or desirable. If the Administrator shall not have joined
in such appointment within 15 days after the receipt by it of a request so to
do, the Indenture Trustee alone shall have the power to make such appointment.
No co-Indenture Trustee or separate Indenture Trustee hereunder shall be
required to meet the terms of eligibility of a successor Indenture Trustee under
Section 6.11 and no notice to Noteholders of the appointment of any co-Indenture
Trustee or separate Indenture Trustee shall be required under Section 6.08
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(b) Every separate Indenture Trustee and co-Indenture Trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate Indenture Trustee
or co-Indenture Trustee jointly (it being understood that such separate
Indenture Trustee or co- Indenture Trustee is not authorized to act
separately without the Indenture Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate Indenture Trustee or co-Indenture
Trustee, but solely at the direction of the Indenture Trustee;
(ii) no Indenture Trustee hereunder shall be
personally liable by reason of any act or
omission of any other Indenture Trustee hereunder; and
(iii) the Indenture Trustee and the Administrator may at any time
accept the resignation of or remove any separate Indenture Trustee or
co-Indenture Trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate Indenture
Trustees and co-Indenture Trustees, as effectively as if given to each of them.
Every instrument appointing any separate Indenture Trustee or co-Indenture
Trustee shall refer to this Agreement and the conditions of this Article. Each
separate Indenture Trustee and co-Indenture Trustee, upon its acceptance of the
trusts conferred, shall be vested with the estates or property specified in its
instrument of co-appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture relating to
the conduct of, affecting the liability of or affording protection to, the
Indenture Trustee. Every such instrument shall be filed with the Indenture
Trustee and a copy thereof given to the Administrator.
(d) Any separate Indenture Trustee or co-Indenture Trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any separate
Indenture Trustee or co-Indenture Trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Indenture Trustee, to the extent
permitted by law, without the appointment of a new or successor Indenture
Trustee. Notwithstanding anything to the contrary in this Indenture, the
appointment of any separate Indenture Trustee or co-Indenture Trustee shall not
relieve the Indenture Trustee of its obligations and duties under this
Indenture.
Section 6.11. Eligibility. The Indenture Trustee shall at all times satisfy
the requirements of TIA S.310(a). The Indenture Trustee hereunder shall at all
times be a financial institution organized and doing business under the laws of
the United States of America or any state, authorized under such laws to
exercise corporate trust powers, whose long term unsecured debt is rated at
least Baa3 by Moody's and shall have a combined capital and surplus of at least
$[ ] or shall be a member of a bank holding system the aggregate combined
capital and surplus of which is $[ ] and subject to supervision or examination
by federal or state authority, provided that the Trustee's separate capital and
surplus shall at all times be at least the amount required by Section 310(a)(2)
of the TIA. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of a supervising or examining authority,
then for the purposes of this Section 6.ll, the combined capital and surplus of
such Person shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 6.ll, the Trustee shall resign immediately in the manner and with the
effect specified in Section 6.08. The Indenture Trustee shall comply with TIA
S.310(b); provided, however, that there shall be excluded from the operation of
TIA S.310(b)(1) any indenture or
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indentures under which other securities of the
Issuer are outstanding if the requirements for such exclusion set forth in
TIA S.310(b)(1) are met.
Section 6.12. Pennsylvania Motor Vehicle Sales Finance Act Licenses.
The Indenture Trustee shall use its best efforts to maintain the effectiveness
of all licenses required under the Pennsylvania Motor Vehicle Sales Finance Act
in connection with this Indenture and the transactions contemplated hereby
until the lien and security interest of this Indenture shall no longer be in
effect in accordance with the terms hereof.
Section 6.13. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA S.311(a), excluding any creditor
relationship listed in TIA S.311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA S.311(a) to the extent indicated.
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (i) not more than five days after the earlier of (a) each Record Date
and (b) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Noteholders as of such Record Date and (ii) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
ten days prior to the time such list is furnished; provided, however, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished.
Section 7.02. Preservation of Information: Communication to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Noteholders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.01 and the names and addresses of Noteholders received by the Indenture
Trustee in its capacity as Note Registrar and shall otherwise comply with TIA
S.312(a). The Indenture Trustee may destroy any list furnished to it as
provided in such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA S. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA S. 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer is
required (if at all) to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission such
additional information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations;
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA S.313(c)) such summaries of
any information, documents and reports required to be filed by the issuer
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pursuant to clauses (i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA S.313(a),
within 60 days after [February 1] beginning with [February 1, _____], the
Indenture Trustee shall mail to each Noteholder as required by TIA S.313(c) a
brief report dated as of such date that complies with TIA S.313(a). The
Indenture Trustee also shall comply with TIA S.313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Collateral, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article Five.
Section 8.02. Trust Accounts.
(a) On or prior to the Closing Date, the Issuer shall cause the Servicer to
establish and maintain, in the name of the Indenture Trustee, for the benefit of
the Noteholders and the Certificateholders, the Trust Accounts as provided in
Section 5.05 of the Sale and Servicing Agreement.
(b) All Available Monies with respect to each Due Period will be deposited
in the Collection Account as provided in Section 5.05 of the Sale and Servicing
Agreement. On or before each Distribution Date, all amounts required to be
deposited in the Note Distribution Account with respect to the preceding Due
Period pursuant to Section 5.05 of the Sale and Servicing Agreement will be
transferred from the Collection Account and/or the Reserve Account to the Note
Distribution Account.
(c) On each Distribution Date, the Indenture Trustee shall distribute all
amounts on deposit in the Note Distribution Account to Noteholders in respect of
the Notes to the extent of amounts due and unpaid on the Notes for principal and
interest as follows:
(i) to the Class A-1 Noteholders, accrued and unpaid interest on the
outstanding principal amount of the Class A-1 Notes at the Class A-1 Rate
and to the Class A-2 Noteholders, accrued and unpaid interest on the
outstanding principal amount of the Class A-2 Notes at the Class A-2 Rate;
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(ii) only to the extent of funds withdrawn from the Pre-Funding
Account and deposited in the Note Distribution Account by the Indenture
Trustee pursuant to Section 7.07 of the Sale and Servicing Agreement:
(A) if the amount of such funds is equal to or less than
$150,000, to the Holders of the Class A-1 Notes on account of principal up
to the Outstanding Amount thereof; and
(B) if the amount of such funds is greater than $150,000,
pro rata, calculated on the then current principal balance of the Class A-1
and Class A-2 Notes, to the Holders of the Class A-1 Notes and the Holders
of the Class A-2 Notes;
(iii) to the Class A-1 Noteholders in reduction of the Outstanding
Amount of the Class A-1 Notes until the Outstanding Amount of the Class A-1
Notes is reduced to zero; and
(iv) to the Class A-2 Noteholders in reduction of the Outstanding
Amount of the Class A-2 Notes until the Outstanding Amount of the Class A-2
Notes is reduced to zero.
Section 8.03. General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Eligible Investments and reinvested by the Indenture Trustee upon
receipt of an Issuer Order, subject to the provisions of Section 5.05 of the
Sale and Servicing Agreement. Except as otherwise provided in Section 5.05 of
the Sale and Servicing Agreement, all income or other gain from investments of
moneys deposited in such Trust Accounts shall be deposited by the Indenture
Trustee in the Collection Account, and any loss resulting from such investments
shall be charged to the related Trust Account. The Issuer will not direct the
Indenture Trustee to make any investment of any funds or to sell any investment
held in any of the Trust Accounts unless the security interest granted and
perfected in such account will continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Indenture Trustee to make
any such investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as Indenture Trustee, in accordance with their
terms.
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00
a.m., New York City time (or such other time as may be agreed by the Issuer and
Indenture Trustee), on any Business Day or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Notes but the Notes
shall not have been declared due and payable pursuant to Section 5.02 or (iii)
if such Notes shall have been declared due and payable following an Event of
Default, amounts collected or receivable from the Collateral are being applied
in accordance with Section 5.05 as if there had not been such a declaration,
then the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in one or more Eligible Investments.
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Section 8.04. Release of Collateral.
(a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Indenture Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture Trustee
as provided in this Article shall be bound to ascertain the Indenture Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Collateral that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA SS.314(c) and
314(d)(1) meeting the applicable requirements of Section 11.01..
Section 8.05. Opinion of Counsel. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.04(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form and substance satisfactory to the Indenture Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions for this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Collateral. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes and with prior notice
to each Rating Agency, the Issuer and the Indenture Trustee, when authorized by
an Issuer Order, and the other parties hereto at any time from time to time, may
enter into one or more indentures supplemental hereto (which shall conform to
the provisions of the TIA as in force at the date of the execution thereof), in
form satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien created by this Indenture, or to subject to the lien
created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
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(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or the Transaction
Documents or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided that such action shall not adversely affect the interests of the
Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor Indenture Trustee with respect to the Notes and to
add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by more
than one Indenture Trustee, pursuant to the requirements of Article Six;
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA. The Indenture Trustee is hereby authorized
to join in the exemption of any such supplemental indenture and to make
any further appropriate agreements and stipulations that may be therein
contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes and with
prior notice to each Rating Agency, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
Section 9.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to each Rating Agency, and with the consent of the Holders of
not less than 66 2/3% of the Outstanding Amount of the Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that, no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Date Amount with respect thereto, change the
provisions of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Collateral to payment of principal of
or interest on the Notes, or change any place of payment where, or the coin
or currency in which, any Note or the interest thereon is payable, or
impair the right to institute suit for the enforcement of the provisions of
this Indenture requiring the application of funds available therefor, as
provided in Article Five, to the payment of any such amount due on the
Notes on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes,
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding";
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(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to sell or liquidate the
Collateral pursuant to Section 5.04 or amend the provisions of this Article
which specify the percentage of the Outstanding Amount of the Notes
required to amend this Indenture or the other Transaction Documents;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the other Transaction Documents cannot be
modified or waived without the consent of the Holder of each Outstanding
Note affected thereby; or
(vi) permit the creation of any lien ranking prior to or on a parity
with the lien created by this Indenture with respect to any part of the
Collateral or, except as otherwise permitted or contemplated herein,
terminate the lien created by this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security provided
by the lien created by this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of the Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the parties hereto of any supplemental
indenture pursuant to this Section, the Indenture Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Indenture Trustee shall be entitled to receive, and subject
to Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
parties hereto and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 9.05. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act as then in
effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture.
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If the Issuer or the Indenture Trustee shall so determine, new notes so
modified as to conform, in the opinion of the Indenture Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Indenture Trustee in exchange for
Outstanding Notes.
ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01. Redemption.
(a) In the event that the Seller pursuant to Section 7.10 of the Sale and
Servicing Agreement purchases the corpus of the Trust, the Class A-2 Notes are
subject to redemption in whole, but not in part, on the Distribution Date on
which such repurchase occurs, for a purchase price equal to the outstanding
principal, and accrued interest on the Class A-2 Notes; provided, however, that
the Issuer has available funds sufficient to pay such amounts. Seller, the
Servicer or the Issuer shall furnish each Rating Agency notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a),
the Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 20 days prior to the Redemption Date and the
Issuer shall deposit with the Indenture Trustee in the Note Distribution Account
the Redemption Price of the Notes to be redeemed whereupon all such Notes shall
be due and payable on the Redemption Date upon the furnishing of a notice
complying with Section 10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.02 of the Trust Agreement or Section 5.02(b) of this Indenture, the proceeds
of such sale shall be distributed as provided in Section 5.06. If amounts are to
be paid to Noteholders pursuant to this Section 10.01(b), the Servicer or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Indenture Trustee not later than 20 days prior to the Redemption Date whereupon
all such amounts shall be payable on the Redemption Date.
(c) If (x) the Pre-funded Amount has not been reduced to zero on the
Distribution Date on which the Funding Period ends (or, if the funding Period
does not end on a Distribution Date, on the first Distribution Date following
the end of the Funding Period) or (y) the Pre-Funded Amount has been reduced to
$150,000 or less on any Distribution Date, in either case after giving effect to
any reductions in the Pre-funded Amount on such Distribution Date pursuant to
Section 7.07 of the Sale and Servicing Agreement, one or more classes of Notes
then outstanding will be redeemed, in whole or in part, as described in Section
8.02(c) in a principal amount described therein.
Section 10.02. Form of Redemption Notice.
(a) Notice of redemption under section 10.01(a) shall be given by the
Indenture Trustee by first-class mail, postage prepaid, mailed not less than
five days prior to the applicable Redemption Date to each Holder of Notes, as of
the close of business on the Record Date preceding the applicable Redemption
Date, at such Holder's address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Date Amount; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Date Amount (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
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Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required
to be given to Noteholders.
Section 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 10.02, on the Redemption Date become due and payable at the
Redemption Date Amount and (unless the Issuer shall default in the payment of
the Redemption Date Amount) no interest shall accrue on the Redemption Date
Amount for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Date Amount.
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Indenture Trustee
to take any action under any provision of this Indenture, the Issuer shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, and (iii) (if required by the TIA) an Independent Certificate
from a firm of certified public accountants meeting the applicable requirements
of this section and TIA S.314(c), except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished. No additional certificate or opinion
need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has read
or has caused to be read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to enable
such signatory to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory, such
condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for
authentication and delivery of the Notes or the release of any property subject
to the lien created by this Indenture, the Issuer shall, in addition to any
obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish
to the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of the signer thereof such certificate as to the fair value (within 90
days of such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
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(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Issuer shall also
deliver to the Indenture Trustee an Independent Certificate as to the named
matters, if the fair value to the Issuer of the property to be so deposited and
of all other such property made the basis of any such withdrawal or release
since the commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Outstanding Amount of the Notes, but such a
certificate need not be furnished with respect to any property so deposited, if
the fair value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the Outstanding
Amount of the Notes.
(iii) Other than with respect to any release described in clause (A)
or (B) of Section 11.01(b)(v), whenever any property or securities are to be
released from the lien created by this Indenture, the Issuer shall also furnish
to the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value (within 90
days of such release) of the property or securities proposed to be released and
stating that in the opinion of such person the proposed release will not impair
the security created by this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to
the same matters if the fair value of the property or securities and of all
other property or securities (other than property described in clauses (A) or
(B) of Section 11.01(b)(v)) released from the lien created by this Indenture
since the commencement of the then current fiscal year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10% or
more of the Outstanding Amount of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the fair
value thereof as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the Issuer
may, without compliance with the other provisions of this Section, (A) collect,
liquidate, sell or otherwise dispose of the Contracts as and to the extent
permitted or required by the Transaction Documents, (B) make cash payments out
of the Trust Accounts as and to the extent permitted or required by the
Transaction Documents, so long as the Issuer shall deliver to the Indenture
Trustee every six months, commencing December 15, 1996, an Officer's Certificate
stating that all the dispositions of Collateral described in clauses (A) or (B)
that occurred during the preceding six calendar months were in the ordinary
course of the Issuer's business and that the proceeds thereof were applied in
accordance with the Transaction Documents.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Person as to other matters, and any such Person may certify or given an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Servicer, the
Seller or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller or the Issuer, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article Six.
Section 11.03. Acts of Noteholders.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Noteholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by agents duly appointed
in writing; and except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(c) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(d) The ownership of Notes shall be proved by the Note Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 11.04. Notices. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Eaglemark, Inc.
150 South Wacker Drive, Suite 3020
Chicago, Illinois 60606
Attention: Michael E. Sulentic
Telecopier No.: (312) 368-4372
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(ii) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-___
1179 Fairview Drive, Suite G
Carson City, Nevada 89701
Telecopier No.: (702) 884-4469
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to the Owner Trustee or the Issuer:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-1576
(v) If to Moody's:
Moody's Investor's Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, A
Division of The McGraw Hill Companies
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
(vii) If to the Initial Purchaser:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Attention: Asset-Backed Securities Group
Telecopier No.: (212) 783-3848
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
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Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event of Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
Section 11.06. Alternate Payment and Notice Provisions. Notwithstanding any
provisions of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
Section 11.07. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 11.08. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co-Indenture Trustees and agents.
Section 11.09. Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 11.10. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.11. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
45
<PAGE>
Section 11.12. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 11.13. Counterparts. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 11.14. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
Section 11.15. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficiary interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article Six, Seven and Eight of the Trust
Agreement.
Section 11.16. No Petition. The parties hereto, by entering into this
Indenture, and each Noteholder, by accepting a Note or a beneficial interest in
a Note, hereby covenant and agree that they will not at any time institute
against the Seller, the Issuer or any General Partner, or join in any
institution against the Seller, the Issuer or any General Partner of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the other Transaction Documents.
Section 11.17. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested, the Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
Section 11.18. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA SS.310 through 317 that impose duties on any person
(including the provisions automatically deemed included herein unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered as of the day and year first above written.
HARLEY-DAVIDSON EAGLEMARK OWNER TRUST _____
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf of the Issuer as
Owner Trustee under the Trust Agreement
By: __________________________________
Printed Name:_____________________
Title:____________________________
HARRIS TRUST AND SAVINGS BANK, not in its individual
capacity but solely as Indenture Trustee
By: _________________________________
Printed Name: Robert D. Foltz
Title: Vice President
47
<PAGE>
STATE OF ILLINOIS )
) ss
COUNTY OF )
On before me, ,
[insert date] [Here insert name and title of notary]
personally appeared ,
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
48
<PAGE>
STATE OF ILLINOIS )
) ss
COUNTY OF )
On before me, ,
[insert date] [Here insert name and title of notary]
personally appeared ,
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
<PAGE>
EXHIBIT A
FORM OF SALE AND SERVICING AGREEMENT
<PAGE>
EXHIBIT B
FORM OF CLASS A-1 NOTE
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY
THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
HARLEY-DAVIDSON EAGLEMARK OWNER TRUST_____
[ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT, CLASS A-1
REGISTERED $
No. R-
Harley-Davidson Eaglemark Owner Trust _____, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to [________], or
registered assigns, the principal sum of ___________ ($_____) payable on the
earlier of _______, 199__ (the "Class A-1 Final Distribution Date").
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained on Section 3.01 of the Indenture. Interest on this Note will accrue
for each Distribution Date from the most recent Distribution Date on which
interest has been paid to but excluding such Distribution Date or, if no
interest has yet been paid, from the Closing Date. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
A-1
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as of the date set forth
below.
Date: _______ HARLEY-DAVIDSON EAGLEMARK OWNER TRUST ____
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee, under the
Trust Agreement
By: ____________________________________
Printed Name:_____________________
Title:_____________________________
A-2
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK
not in its individual capacity but solely as
Indenture Trustee
By: __________________________________
Authorized Signatory
A-3
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its [ ]% Harley-Davidson Motorcycle Contract Backed Notes, Class
A-1 (the "Class A-1 Notes"), all issued under an Indenture, dated as of _____
(the "Indenture"), among the Issuer and Harris Trust and Savings Bank, as
Indenture Trustee (the "Indenture Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes and the Class A-2 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture subject to the subordination of the Class
A-2 Notes under certain circumstances.
Principal of the Class A-1 Notes will be payable on the earlier of the
Class A-1 Final Distribution Date and the Redemption Date, if any, selected
pursuant to the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Class A-1 Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and the
Indenture Trustee or the Holders of the Notes representing not less than 66 -
2/3% of the Outstanding Amount of the Notes, voting together as a single class,
have declared the Notes to be immediately due and payable in the manner provided
in the Indenture. All principal payments on the Class A-1 Notes shall be made
pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution Date
shall be made by wire transfer to the account to the Person whose name appears
as the Registered Holder of this Note (or one or more Predecessor Notes) on the
Note Register as of the close of business on each Record Date, payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed within five days of such Distribution Date
and the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Corporate Trust Office of the Indenture Trustee or
at the office of the Indenture Trustee's agent appointed for such purposes
located in the City of Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
A-4
<PAGE>
Each Noteholder by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Seller or
the Issuer, or join in any institution against the Trust Depositor or the Issuer
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note (and each
Noteholder by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for the federal, state and local income, single business and franchise
tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer and the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer and the Noteholders representing 66 2/3% of the Outstanding Amount of the
Notes. The Indenture also contains provisions permitting the Noteholders
representing specified percentages of the Outstanding Amount of the Notes, on
behalf of the Noteholders, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Noteholder (or any one of
more Predecessor Notes) shall be conclusive and binding upon such Holders and
upon all future Noteholders and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of Illinois, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
A-5
<PAGE>
EXHIBIT C
FORM OF CLASS A-2 NOTE
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY
THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
HARLEY-DAVIDSON EAGLEMARK OWNER TRUST_______
__% HARLEY-DAVIDSON MOTORCYCLE CONTRACT, CLASS A-2
REGISTERED $
No. R-
Harley-Davidson Eaglemark Owner Trust____, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to [___________], or
registered assigns, the principal sum of ___________ ($__________) payable on
the earlier of _______, ____ (the "Class A-2 Final Distribution Date") and the
Redemption Date, if any, pursuant to Sections 10.01(a) and (b) of the Indenture
referred to on the reverse hereof. No payments of principal of the Class A-2
Notes shall be made until the principal on the Class A-1 Notes have been paid
in full.
The Issuer will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in the Indenture. Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from the Closing Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
B-1
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date:_________ HARLEY-DAVIDSON EAGLEMARK OWNER TRUST _____
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf of
the Issuer as Owner Trustee, under the
Trust Agreement
By: _____________________________________
Printed Name:_____________________
Title:_____________________________
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK
not in its individual capacity but solely
as Indenture Trustee
By: _______________________________________
Authorized Signatory
B-2
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its [ ]% Harley-Davidson Motorcycle Contract, Class A-2 (the
"Class A-2 Notes"), all issued under an Indenture, dated as of ______ (the
"Indenture"), among the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Class A-2 Notes and the Class A-1 Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture subject to no payment of principal on the
Class A-2 Notes until all principal has been paid on the Class A-1 Notes.
Principal of the Class A-2 Notes will be payable on the earlier of the
Class A-2 Final Distribution Date and the Redemption Date, if any, pursuant to
Section 10.01(a) or 10.01(b) of the Indenture. Notwithstanding the foregoing,
the entire unpaid principal amount of the Class A-2 Notes shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing unless the Holders of the Notes representing not less than 66 2/3 of
the Outstanding Amount of the Notes, voting together as a single class, waive
such Event of Default. All principal payments on the Class A-2 Notes shall be
made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution Date
shall be made by check mailed to the Person whose name appears as the Registered
Holder of this Note (or one or more Predecessor Notes) on the Note Register as
of the close of business on each Record Date, except that with respect to Notes
registered on the Record Date in the name of nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated by such
nominee. Such checks shall be mailed to the Person entitled thereto at the
address of such Person as it appears on the Note Register as of the applicable
Record Date without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) affected by any payments made on any Distribution Date shall
be binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Indenture Trustee's principal Corporate Trust Office or at the office of the
Indenture Trustee's agent appointed for such purposes located in the City of
Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.01(a) of the Indenture, in whole, but not in part, at the option of the
Seller, any Distribution Date on or after the date on which the Pool Balance is
less than 10% of the Initial Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new Class A-2 Notes of authorized denomination and in the same
B-3
<PAGE>
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in their individual capacities, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in their
individual capacities, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in their individual capacities, except as
any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder, by acceptance of a Note or a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the Indenture and such
Note that such Noteholder will not at any time institute against the Seller or
the Issuer, or join in any institution against the Trust Depositor or the Issuer
of any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note or of a
beneficial interest in a Note, agrees to treat the Notes for the federal, state
and local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the of Holders of Notes representing 66
2/3% of the Outstanding Amount of all of the Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one of more Predecessor Notes) shall be conclusive and binding upon such
Holders and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of Illinois, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.
B-4
<PAGE>
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
B-5
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
_______________________________________________________________________________
the within Note, and all rights thereunder, hereby irrevocably constituting
and appointing
_______________________________________________________________________________
to transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated: _______________
Signature Guaranteed:
_______________________________________________________________________________
Signature must be guaranteed by an eligible guarantor institution which is a
participant in the Securities Transfer Agent's Medallion Program (STAMP) or
similar signature guarantee program.
_________________________________________
(Authorized Officer)
_______________________________________________________________________________
Notice: The signature(s) on this assignment must correspond with the name(s) as
it appears on the face of the within Note in every particular, without
alteration or enlargement or any change whatsoever.
C-1
<PAGE>
EXHIBIT E
FORM OF NOTE DEPOSITORY AGREEMENT
C-2
<PAGE>
- -------------------------------------------------------------------------------
ADMINISTRATION AGREEMENT
among
HARLEY-DAVIDSON EAGLEMARK OWNER TRUST 199__-__,
as Issuer,
EAGLEMARK, INC.
as Administrator
EAGLEMARK CUSTOMER FUNDING CORPORATION-[___],
as Trust Depositor,
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
Dated as of [___]
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. DUTIES OF THE ADMINISTRATOR.. . . . . . . . . . . . . . . . . . 3
SECTION 2 RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3. COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. . . . . . 6
SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR . . . . . . . . . . . . . . . 6
SECTION 6. NO JOINT VENTURE. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR . . . . . . . . . . . . . . . 6
SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF ADMINISTRATOR . . 6
SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL . . . . . . . . 7
SECTION 10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 11. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 12. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . 8
SECTION 13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 14. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 15. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 16. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 17. NOT APPLICABLE TO EAGLEMARK IN OTHER CAPACITIES . . . . . . . . 9
SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE TRUSTEE. 9
SECTION 19. THIRD-PARTY BENEFICIARY . . . . . . . . . . . . . . . . . . . . 9
SECTION 20. SURVIVABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
This Administration Agreement, dated as of [___], among Harley-Davidson
Eaglemark Owner Trust 199__-__ (the "ISSUER"), Eaglemark, Inc. ( together with
its successors and assigns "EAGLEMARK") in its capacity as administrator, the
"ADMINISTRATOR"), Eaglemark Customer Funding Corporation-[___] (the "TRUST
DEPOSITOR") and Harris Trust and Savings Bank, not in its individual capacity
but solely as Indenture Trustee (together with its successors and assigns, the
"INDENTURE TRUSTEE").
W I T N E S S E T H:
WHEREAS, the Issuer is issuing [ ]% Harley-Davidson Motorcycle
Contract, Class A-1 Notes and [ ]% Harley-Davidson Motorcycle Contract, Class
A-2 Notes, (collectively, the "NOTES") pursuant to the Indenture, dated as of
the date hereof (the "INDENTURE"), between the Issuer and the Indenture Trustee
(capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection with
the issuance of the Notes and of certain beneficial ownership interests of the
Issuer, including (i) a Sale and Servicing Agreement, dated as of the date
hereof (the "SALE AND SERVICING AGREEMENT"), among the Issuer, Harris Trust and
Savings Bank, not in its individual capacity but as Indenture Trustee, the Trust
Depositor and Eaglemark, as servicer (in such capacity, the "SERVICER"), and
(ii) the Indenture (collectively referred to hereinafter as the "TRANSACTION
DOCUMENTS");
WHEREAS, pursuant to the Transaction Documents, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (i) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "COLLATERAL")
and (ii) the beneficial ownership interests in the Issuer (the registered
holders of such interests being referred to herein as the "OWNERS");
WHEREAS, the Issuer and the Owner Trustee desire to have the Administrator
perform certain of the duties of the Issuer and the Owner Trustee referred to in
the preceding clause and to provide such additional services consistent with the
terms of this Agreement and the Transaction Documents as the Issuer and the
Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
NOW, THEREAFTER, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DUTIES OF THE ADMINISTRATOR.
(a) Duties with respect to the Indenture.
(i) The Administrator agrees to perform all its duties as
Administrator and the duties of the Issuer and the Owner Trustee under the
Transaction Documents. In addition, the Administrator shall consult with
the Owner Trustee regarding the duties of the Issuer or the Owner Trustee
under the Indenture. The Administrator shall monitor the performance of
the Issuer and shall advise the Owner Trustee when action is necessary to
comply with the respective duties of the Issuer and the Owner Trustee under
the Indenture. The Administrator shall prepare for execution by the Issuer
or shall cause the preparation by other appropriate persons of, all such
documents, reports, filings, instruments, certificates and opinions that it
shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to the Indenture. In furtherance of the foregoing, the
Administrator shall take all appropriate action that the Issuer or the
Owner Trustee is required to take pursuant to the Indenture including,
without limitation, such of the foregoing as are required with respect to
the following matters under the Indenture (references are to Sections of
the Indenture):
2
<PAGE>
(A) the duty to cause the Note Register to be kept and to give the
Indenture Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section 2.04);
(B) the notification of Noteholders of the final principal payment on
their Notes (Section 2.07(b));
(C) the fixing or causing to be fixed of any special record date and
the notification of the Indenture Trustee and Noteholders with respect to
special payment dates, if any (Section 2.07(c));
(D) the preparation of or obtaining of the documents and instruments
required for execution and authentication of the Notes and delivery of the
same to the Indenture Trustee (Section 2.02);
(E) the preparation, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of Collateral
(Section 2.12);
(F) the maintenance of an office in the City of Chicago, Illinois,
for registration of transfer or exchange of Notes (Section 3.02);
(G) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in the Indenture
regarding funds held in trust (Section 3.03);
(H) the direction to the Indenture Trustee to deposit monies with
Paying Agents, if any, other than the Indenture Trustee (Section 3.03);
(I) the obtaining and preservation of the Issuer's qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the collateral and each other instrument and agreement included in
the Collateral (Section 3.04);
(J) the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation statements,
instruments of further assurance and other instruments and the taking of
such other action as is necessary or advisable to protect the Collateral
other than as prepared by the Servicer (Section 3.05);
(K) the delivery of the Opinion of Counsel on the Closing Date and
certain other statements as to compliance with the Indenture (Sections 3.06
and 3.09);
(L) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to perform its
duties under the Indenture (Section 3.07(b));
(M) the notification of the Indenture Trustee and each Rating Agency
of an Event of Termination under the Sale and Servicing Agreement;
(N) the duty to cause the Servicer to comply with Sections 4.09,
4.10, 4.11 and 5.07 and Article Five and Article Nine of the Sale and
Servicing Agreement (Section 3.14);
3
<PAGE>
(O) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b) and Section 3.11(b));
(P) the delivery of written notice to the Indenture Trustee and each
Rating Agency of each Event of Default under the Indenture and each Event
of Termination by the Servicer under the Sale and Servicing Agreement
(Section 3.18);
(Q) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officer's
Certificate and the obtaining of the Opinion of Counsel and the Independent
Certificate relating thereto (Section 4.01);
(R) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Collateral in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing (Section 5.04);
(S) the preparation and delivery of notice to Noteholders of the
removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee (Section 6.08);
(T) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal
of the Indenture Trustee or any co-trustee or separate trustee (Sections
6.08 and 6.10);
(U) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee is
not the Note Registrar (Section 7.01);
(V) the opening of one or more accounts in the Indenture Trustee's
name, the preparation and delivery of Issuer Orders, Officer's Certificates
and Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections 8.02
and 8.03);
(W) the preparation of an Issuer Request and Officer's Certificate
and the obtaining of an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Collateral (Sections 8.04 and 8.05);
(X) the preparation of Issuer Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures and the
mailing to the Noteholders of notices with respect to such supplemental
indentures (Sections 9.01, 9.02 and 9.03);
(Y) the execution and delivery of new Notes conforming to any
supplemental indenture (Section 9.06);
(Z) the duty to notify Noteholders of redemption of the Notes or to
cause the Indenture Trustee to provide such notification (Section 10.02);
(AA) the preparation and delivery of all Officer's Certificates,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee to take any action under
the Indenture (Section 11.01(a));
(BB) the preparation and delivery of Officer's Certificates and the
obtaining of Independent Certificates, if necessary, for the release of
property from the lien of the Indenture
4
<PAGE>
(Section 11.01(b));
(CC) the notification of the Rating Agencies, upon the failure of the
Issuer, the Owner Trustee or the Indenture Trustee to provide notification,
required pursuant to Section 11.04 of the Indenture (Section 11.04);
(DD) the preparation and delivery to Noteholders and the Indenture
Trustee of any agreements with respect to alternate payment and notice
provisions (Section 11.06); and
(EE) the recording of the Indenture, if applicable (Section 11.14).
(ii) The Administrator will:
(A) except as otherwise expressly provided in the Indenture, pay the
Indenture Trustee's Fees and reimburse the Indenture Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or
made by the Indenture Trustee in accordance with any provision of the
Indenture (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith;
(B) indemnify the Indenture Trustee and its agents for, and hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection with
the acceptance or administration of the transactions contemplated by the
Indenture, including the reasonable costs and expenses of defending
themselves against any claim or liability in connection with the exercise
or performance of any of their powers or duties under the Indenture; and
(C) indemnify the Owner Trustee and its agents for, and hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection with
the acceptance or administration of the transactions contemplated by the
Trust Agreement, including the reasonable costs and expenses of defending
themselves against any claim or liability in connection with the exercise
or performance of any of their powers or duties under the Trust Agreement.
(b) Additional Duties.
(i) In addition to the duties set forth in Section 1(a)(i), the
Administrator shall perform such calculations and shall prepare or shall
cause the preparation by other appropriate persons of, and shall execute on
behalf of the Issuer or the Owner Trustee, all such documents, reports,
filings, instruments, certificates and opinions that the Issuer or the
Owner Trustee are required to prepare, file or deliver pursuant to the
Transaction Documents or Section 5.05 of the Trust Agreement, and at the
request of the Owner Trustee shall take all appropriate action that the
Issuer or the Owner Trustee are required to take pursuant to the
Transaction Documents. In furtherance thereof, the Owner Trustee shall, on
behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to the
terms hereof, one or more powers of attorney substantially in the form of
EXHIBIT A hereto, appointing the Administrator the attorney-in-fact of the
Owner Trustee and the Issuer for the purpose of executing on behalf of the
Owner Trustee and the Issuer all such documents, reports, filings,
instruments, certificates and opinions. Subject to Section 5, and in
accordance with the directions of the Issuer, the Administrator shall
administer,
5
<PAGE>
perform or supervise the performance of such other activities in connection
with the Collateral (including the Transaction Documents) as are not
covered by any of the foregoing provisions and as are expressly requested
by the Issuer and are reasonably within the capability of the
Administrator.
(ii) Notwithstanding anything in this Agreement or the Transaction
Documents to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax
is imposed on the Trust's payments (or allocations of income) to an Owner
as contemplated in Section 5.02(c) of the Trust Agreement. Any such notice
shall specify the amount of any withholding tax required to be withheld by
the Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Administrator shall be
responsible for performance of the duties of the Owner Trustee set forth in
Section 5.05(a), (b), (c) and (d), the penultimate sentence of Section 5.05
and Section 5.06(a) of the Trust Agreement with respect to, among other
things, accounting and reports to Owners; PROVIDED, HOWEVER, that the Owner
Trustee shall retain responsibility for the distribution of the Schedule
K-1s necessary to enable each Owner to prepare its federal and state income
tax returns.
(iv) The Administrator shall satisfy its obligations with respect to
clauses (ii) and (iii) above by retaining, at the expense of the Trust
payable by the Administrator, a firm of independent public accountants (the
"ACCOUNTANTS") acceptable to the Owner Trustee, which shall perform the
obligations of the Administrator thereunder.
(v) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be performed
in connection with the resignation or removal of the Owner Trustee, and any
other duties expressly required to be performed by the Administrator under
the Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions or otherwise deal with any of its Affiliates; PROVIDED,
HOWEVER, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in
the Administrator's opinion, no less favorable to the Issuer than would be
available from unaffiliated parties.
(c) Non-Ministerial Matters.
(i) With respect to matters that in the reasonable judgment of the
Administrator are non-ministerial, the Administrator shall not take any
action unless within a reasonable time before the taking of such action,
the Administrator shall have notified the Owner Trustee of the proposed
action and the Owner Trustee shall not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence, "NON-
MINISTERIAL MATTERS" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Contracts);
6
<PAGE>
(C) the amendment, change or modification of the Transaction
Documents;
(D) the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Administrators or a successor Servicer, or the
consent to the assignment by the Note Registrar, Paying Agent or Indenture
Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and shall not, (A) make any
payments to the Noteholders under the Transaction Documents, (B) sell the
Collateral pursuant to clause (iv) of Section 5.04 of the Indenture, (C)
take any other action that the Issuer directs the Administrator not to take
on its behalf or (D) take any other action which may be construed as having
the effect of varying the investment of the Holders.
SECTION 2 RECORDS. The Administrator shall maintain appropriate
books of account and records relating to services performed hereunder, which
books of account and records shall be accessible for inspection by the Issuer
and the Owner Trustee at any time during normal business hours.
SECTION 3. COMPENSATION. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to a monthly fee
which shall be solely an obligation of the Trust Depositor shall be agreeable
to the Trust Depositor and the Administrator.
SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Administrator shall
have no authority to act for or represent the Issuer or the Owner Trustee in any
way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
SECTION 6. NO JOINT VENTURE. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other business or,
in its sole discretion, from acting in a similar capacity as an administrator
for any other Person or entity even though such person or entity may engage in
business activities similar to those of the Issuer, the Owner Trustee or the
Indenture Trustee.
SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF ADMINISTRATOR.
This Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(a) Subject to Section 8(d) and Section 8(e), the Administrator may resign
its duties hereunder by providing the Issuer with at least 60 days'
prior written notice.
7
<PAGE>
(b) Subject to Section 8(d) and Section 8(e), the Issuer may remove the
Administrator without cause by providing the Administrator with at
least 60 days' prior written notice.
(c) Subject to Section 8(d) and Section 8(e), at the sole option of the
Issuer, the Administrator may be removed immediately upon written
notice of termination from the Issuer to the Administrator if any of
the following events shall occur:
(i) the Administrator shall default in the performance of any of its
duties under this Agreement and, after notice of such default, shall
not cure such default within ten days (or, if such default cannot be
cured in such time, shall not give within ten days such assurance of
cure as shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a decree
or order for relief, and such decree or order shall not have been
vacated within 60 days, in respect of the Administrator in any
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect or appoint a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official for the Administrator or any substantial part of its property
or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief
in an involuntary case under any such law, or shall consent to the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or similar official for the Administrator or any
substantial part of its property, shall consent to the taking of
possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of
creditors or shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) above shall occur, it shall give written notice thereof to the
Issuer and the Indenture Trustee within seven days after the occurrence of such
event.
(d) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall
have been appointed by the Issuer and (ii) such successor
Administrator shall have agreed in writing to be bound by the terms of
this Agreement in the same manner as the Administrator is bound
hereunder.
(e) The appointment of any successor Administrator shall be effective only
after the satisfaction of the Rating Agency Condition with respect to
the proposed appointment.
(f) Subject to Section 8(d) and 8(e), the Administrator acknowledges that
upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and
such Successor Servicer shall automatically become the Administrator
under this Agreement.
SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL. Promptly upon
the effective date of termination of this Agreement pursuant to Section 8 or the
resignation or removal of the Administrator pursuant to Section 8(a), (b) or (c)
respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to Section 8 deliver to the Issuer all property and documents of or
relating to the Collateral then in the custody of the Administrator. In the
event of the resignation or removal of the Administrator pursuant to Section
(a), (b) or (c), respectively, the Administrator shall cooperate with the Issuer
and take all reasonable steps requested to assist the Issuer in making an
orderly transfer of the duties of the Administrator.
8
<PAGE>
SECTION 10. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Administrator:
Eaglemark, Inc.
150 South Wacker Drive, Suite 3120
Chicago, Illinois 60606
Attention: Michael E. Sulentic
Telecopier No.: (312) 368-4372
(ii) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-[___]
4150 Technology Way
Carson City, Nevada 89706
Telecopier No.: (702) 884-4469
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to the Issuer or the Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11. AMENDMENTS. This Agreement may be amended from time to time
by a written amendment duly executed and delivered by the parties hereto, with
the written consent of the Owner Trustee but without the consent of the
Noteholders and the Certificateholders, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Noteholders or
9
<PAGE>
Certificateholders; provided that such amendment will not, in the Opinion of
Counsel satisfactory to the Indenture Trustee, materially and adversely affect
the interest of any Noteholder or Certificateholder. This Agreement may also be
amended by the parties hereto with the written consent of the Owner Trustee and
the holders of Notes evidencing at least [a majority] in the Outstanding Amount
of the Notes and the holders of Certificates evidencing at least [a majority] of
the Certificate Balance for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of Noteholders or the Certificateholders;
PROVIDED, HOWEVER, that no such amendment may (i) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on the Contracts or distributions that are required to be made for the
benefit of the Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the holders of Notes and Certificates which are required to
consent to any such amendment, without the consent of the Insurer and the
holders of all outstanding Notes and Certificates. Notwithstanding the
foregoing, the Administrator may not amend this Agreement without the permission
of the Trust Depositor, which permission shall not be unreasonably withheld.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned
by the Administrator unless such assignment is previously consented to in
writing by the Issuer, the Indenture Trustee and the Owner Trustee and subject
to the satisfaction of the Rating Agency Condition in respect thereof. An
assignment with such consent and satisfaction, if accepted by the assignee,
shall bind the assignee hereunder in the same manner as the Administrator is
bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned
by the Administrator without the consent of the Issuer or the Owner Trustee to a
corporation or other organization that is a successor (by merger, consolidation
or purchase of assets) to the Administrator; provided that such successor
organization executes and delivers to the Issuer, the Owner Trustee and the
Indenture Trustee an agreement, in form and substance reasonably satisfactory to
the Owner Trustee and the Indenture Trustee, in which such corporation or other
organization agrees to be bound hereunder by the terms of said assignment in the
same manner as the Administrator is bound hereunder. Subject to the foregoing,
this Agreement shall bind any successors or assigns of the parties hereto.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 14. HEADINGS. The section and subsection headings hereof have
been inserted for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement.
SECTION 15. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same agreement.
SECTION 16. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 17. NOT APPLICABLE TO EAGLEMARK IN OTHER CAPACITIES. Nothing in
this Agreement shall affect any obligation Eaglemark may have in any other
capacity.
SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE.
(a) Notwithstanding anything contained herein to the contrary, this
instrument has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or any
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder,
as to all of which recourse shall be had solely to the assets of the Issuer.
For all purposes of this Agreement, in the performance
10
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of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles Six, Seven and Eight of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Harris Trust and Savings Bank not in its
individual capacity but solely as Indenture Trustee and in no event shall Harris
Trust and Savings Bank have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 19. THIRD-PARTY BENEFICIARY. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
SECTION 20. SURVIVABILITY. The obligations of the Administrator
described in Section 1(a)(ii) hereof shall survive termination of this
Agreement.
[this portion of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
HARLEY-DAVIDSON EAGLEMARK OWNER TRUST 199__-__
By: Wilmington Trust Company, not in
its individual capacity but solely as Owner Trustee
By: ______________________________________
Printed Name: __________________________
Title: _________________________________
EAGLEMARK CUSTOMER FUNDING CORPORATION-[___],
as Trust Depositor
By: ________________________________________
Printed Name: Michael E. Sulentic
Title: Treasurer
HARRIS TRUST AND SAVINGS BANK, not in its individual
capacity but solely as Indenture Trustee
By: _________________________________________
Printed Name: Robert D. Foltz
Title: Vice President
EAGLEMARK, INC., as Administrator
By: ___________________________________________
Printed Name: Michael E. Sulentic
Title: Vice President
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EXHIBIT A
LIMITED POWER OF ATTORNEY
State of Illinois )
) SS.
County of Cook )
KNOW ALL PERSONS BY THESE PRESENTS, that Wilmington Trust Company, a
Delaware banking corporation (the "OWNER TRUSTEE"), whose principal executive
office is located at Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, Delaware Attention: Trust Administration, by and
through its duly elected and authorized officer, ________________________, a
___________________, on behalf of itself and of Harley-Davidson Eaglemark Owner
Trust 199__-__ (the "TRUST") as Issuer under the Administration Agreement, dated
as of [___] (the "ADMINISTRATION AGREEMENT"), among the Trust, Eaglemark
Customer Funding Corporation-[___], Harris Trust and Savings Bank, as Indenture
Trustee, and Eaglemark, Inc., as Administrator, does hereby nominate, constitute
and appoint Eaglemark, Inc. a Nevada corporation, each of its officers from time
to time and each of its employees authorized by it from time to time to act
hereunder, jointly and each of them severally, together or acting alone, its
true and lawful attorney-in-fact, for the Owner Trustee and the Issuer in their
name, place and stead, in the sole discretion of such attorney-in-fact, to
perform such calculations and prepare or cause the preparation by other
appropriate persons of, and to execute on behalf of the Issuer or the Owner
Trustee, all such documents, reports, filings, instruments, certificates and
opinions that the Issuer or the Owner Trustee is required to prepare, file or
deliver pursuant to the Administration Agreement, and to take any and all other
action, as such attorney-in-fact may deem necessary or desirable in accordance
with the directions of the Owner Trustee and in connection with its duties as
Administrator or successor Administrator under the Administration Agreement.
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Administration Agreement.
The Owner Trustee hereby ratifies and confirms the execution, delivery and
performance (whether before or after the date hereof) of the above-mentioned
documents, reports, filings, instruments, certificates and opinions, by the
attorney-in-fact and all that the attorney-in-fact shall lawfully do or cause to
be done by virtue hereof.
The Owner Trustee hereby agrees that no person or other entity dealing with
the attorney-in-fact shall be bound to inquire into such attorney-in-fact's
power and authority hereunder and any such person or entity shall be fully
protected in relying on such power of authority.
This Limited Power of Attorney may not be assigned without the prior
written consent of the Owner Trustee. It is effective immediately and will
continue until it is revoked.
This Limited Power of Attorney shall be governed and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflicts of law.
Executed as of this _____ day of April, 1997.
Wilmington Trust Company,
not in its individual capacity but solely as
Owner Trustee,
By: ____________________________________
Printed Name: ________________________
Title: _______________________________
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT OF
NOTARY PUBLIC
State of Illinois )
) SS.
County of Cook )
On April __, 1997 before me,__________________________________________
[insert date] [Here insert name and title of notary]
personally appeared ____________________________________
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ties), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature __________________________________________________ [SEAL]
